
Class Hl h- 7 JT / 
Book . U(o 



TRUSTS IN FOREIGN COUNTRIES 




LAWS AND REFERENCES 



CONCERNING 



INDUSTRIAL COMBINATIONS 



IN 



AUSTRALIA, CANADA, NEW ZEALAND, 
AND CONTINENTAL EUROPE 



COMPILED BY 

FRED. A. JOHNSON 



Printed for the use of the Committee on Interstate Commerce 




WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1912 



*f 



TRUSTS IN FOREIGN COUNTRIES 



LAWS AND REFERENCES 

rgrV 

CONCERNING 

INDUSTRIAL COMBINATIONS 



IN 



AUSTRALIA, CANADA, NEW ZEALAND, 
AND CONTINENTAL EUROPE 



COMPILED BY 

FRED. A. J r KNSON 



Printed for the use of the Committee on Interstate Commerce 




WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1912 






COMMITTEE ON INTERSTATE COMMERCE. 
MOSES E. CLAPP, Minnesota, Chairman. 



SHELBY M. CULLOM, Illinois. 
W. MURRAY CRANE, Massachusetts. 
ALBERT B. CUMMINS, Iowa. 
FRANK B. BRANDEGEE, Connecticut. 
GEORGE T. OLIVER, Pennsylvania. 
HENRY F. LIPPITT, Rhode Island. 
CHARLES E. TOWNSEND, Michigan. 
ROBERT M. LA FOLLETTE, Wisconsin. 



BENJAMIN R. TILLMAN, South Caro- 
lina. 
MURPHY J. FOSTER, Louisiana. 
FRANCIS G. NEWLANDS, Nevada. 
JAMES P. CLARKE, Arkansas. 
THOMAS P. GORE, Oklahoma. 
CLARENCE W. WATSON, West Virginia. 
ATLEE FOMERENE, Ohio. 



LEE F. WARNER, Clerk. 



D. OF D. 
FEB 10 1913 






* 






^ 



CONTENTS 



Australia: Page. 

Australian industries preservation act 9 

Excise tariff act (held to be unconstitutional) 20 

The patents act 21 

Canada: 

Criminal law relative to the restraint of trade and competition 26 

Canadian legislation concerning patents 26 

Licences 30 

Amendment to inland revenue act 30 

Power of governor in council 31 

Combines investigation act 32 

New Zealand: 

Act for the repression of monopolies in trade or commerce 44 

Patents, designs, and trade-marks 47 

Monopoly prevention act and amendment 48 

Act to prevent the establishment of monopolies in the sale of flour and 

other products 53 

Act to amend the agricultural implement manufacture, importation, and 

sale act 56 

Act to regulate and control the manufacture and sale of certain agricul- 
tural implements 57 

British Empire : List of company acts 60 

The law concerning monopolistic combinations in continental Europe, by 

Francis Walker ■. 62 

1. German Empire 63 

2. Austria 67 

3. France 71 

The German steel syndicate, by Francis Walker 81 

Legal status of trusts in Germany, by A. M. Thackara 107 

Legal operation of trusts in Germany, by Eobert P. Skinner 115 

The causes of trusts and some remedies for them, by Francis Walker 121 

GREAT BRITAIN CONSOLIDATION ACTS. 

Introduction 139 

Classification of companies ' 142 

Board of trade — Powers and duties in connection with the administration of 

the companies (consolidation) act, 1908 143 

Board of trade — Annual reports — Extracts 148 

Information available to the public 150 

Penalties 156 

Board of trade — Outline of history and organization 163 

Form — Statement in lieu of prospectus 154 

Form— Particulars of contracts for shares allotted as fully or partly paid up 

otherwise than in cash 156 

Table — More important information required to be filed at registries of joint- 
stock companies in the British Empire 162 

3 



PREFACE 



While the resolution authorizing and directing the committee to 
investigate and report whatever changes may be necessary in the 
existing statutes relating to the creation and control of corporations, 
persons, and firms engaged in interstate commerce confined the 
inquiry to congressional and legislative acts within the United States, 
it was found practicable to have a compilation and abstract of the 
existing laws and references thereto concerning trusts and industrial 
combinations in other countries. 

The contents of this volume did not originally contain the Great 
Britain Companies Consolidation Act, which is now added as a part 
of the work. 

December 5, 1912. 



In the Senate of the United States. 

Resolved, That the Committee on Interstate Commerce is hereby authorized and 
directed, by subcommittee or otherwise, to inquire, into and report to the Senate at 
the earliest date practicable what changes are necessary or desirable in the laws of 
the United States relating to the creation and control of corporations engaged in inter- 
state commerce, and what changes are necessary or desirable in the laws of the United 
States relating to persons or firms engaged in interstate commerce, and for this pur- 
pose they are authorized to sit during the sessions or recesses of Congress, at such 
times and places as they may deem desirable or practicable; to send for persons and 
papers, to administer oaths, to summon and compel the attendance of witnesses, to 
conduct hearings and have reports of same printed for use, and to employ.such clerks, 
stenographers, and other assistants as shall be necessary, and any expense in con- 
nection with such inquiry shall be paid out of the contingent fund of the Senate upon 
vouchers to be approved by the chairman of the committee. 

Charles G. Bennett, 

Secretary. 



TRUSTS IN FOREIGN COUNTRIES. 



AUSTRALIA. 

THE AUSTRALIAN INDUSTRIES PRESERVATION ACT, 

1906. 

[As amended by the acts of 1907, 1909, and 1910.] 

AN ACT For the preservation of Australian industries, and for the 
repression of destructive monopolies. 

[Assented to Sept. 24, 1906.] 

Be it enacted by the King^s Most Excellent Majesty, 
the Senate, and the House of Representatives of the Com- 
monwealth of Australia, as follows : 

Part I. — Preliminary. 

1. This act may be cited as the Australian industries 
preservation act, 1906-1910. 

2. This act is divided into parts as follows: Part I, 
preliminary; Part II, repression of monopolies; Part III, 
prevention of dumping. 

3. In this act, unless the contrary intention appears — 
" Commercial trust " includes a combination, whether 

wholly or partly within or beyond Australia, of separate 
and independent persons (corporate or unincorporate) , 
whose voting power or determinations are controlled or 
controllable by (a) the creation of a trust as understood 
in equity, or of a corporation wherein the trustees or cor- 
poration hold the interests, shares, or stock of the con- 
stituent persons; or (b) an agreement; or (c) the creation 
of a board of management or its equivalent; or (d) some 
similar means; and includes any division, part, constit- 
uent person, or agent of a commercial trust. 

u Inadequate remuneration for labor " includes inade- 
quate pay or excessive hours or any terms or conditions of 
labor or employment unduly disadvantageous to workers. 

" Person " includes corporation and firm and a com- 
mercial trust. 

" The comptroller general " means the comptroller gen- 
eral of customs. 

"Answer questions" means that the person on whom 
the obligation of answering questions is cast shall to the 



10 TRUSTS IN FOREIGN COUNTRIES. 

best of his knowledge, information, and belief truly 
answer all questions on the subject mentioned that the 
comptroller general or the person named by him shall ask. 
" Produce documents " means that the person on whom 
the obligation to produce documents is cast shall to the 
best of his power produce to the comptroller general or 
to the person named by him all documents relating to 
the subject matter mentioned. 

Part II. — Repression of monopolies. 

4. (1) Any person who, either as principal or as agent, 
makes or enters into any contract, or is or continues to be 
a member of or engages in any combination in relation 
to trade or commerce Avith other countries or among the 
States — (a) in restraint of or with intent to restrain 
trade or commerce; or (b) to the destruction or injury 
of or with intent to destroy or injure by means of unfair 
competition any Australian industry, the preservation of 
which is advantageous to the Commonwealth, having due 
regard to the interests of producers, workers, and con- 
sumers, is guilty of an offense. 

Penalty, £500, r, in the case of a continuing offense, 
£500 for each day during which the offense continues. 

(2) Every contract made or entered into in contra- 
vention of this section shall be absolutely illegal and 
void. 

(3) It shall be a defense to a proceeding for an offense 
under paragraph (a) of subsection (1) of this section, 
and an answer to an allegation that a contract was made 
or entered into in restraint of, or with intent to restrain, 
trade or commerce, if the party alleged to have contra- 
vened this section proves (a) that the matter or thing 
alleged to have been done in restraint of, or with intent 
to restrain, trade or commerce, was not to the detriment 
of the public; and (b) that the restraint of trade or com- 
merce effected or intended was not unreasonable. 

(Section 5 repealed.) 

6. (1) For the purposes of section 4 and section 10 of 
this act, unfair competition means competition which is 
unfair in the circumstances; and in the following cases 
the competition shall be deemed to be unfair unless the 
contrary is proved : 

(a) If the defendant is a commercial trust. 

(b) If the competition would probably or does in fact 
result in an inadequate remuneration for labor in the 
Australian industry. 

(c) If the competition would probably or does in fact 
result in creating substantial disorganization in Austra- 
lian industry or throwing workers out of employment. 

(d) If the defendant, with respect to any goods or 
services which are the subject of the competition, gives, 
offers, or promises to any person any rebate, refund, dis- 



TRUSTS IN FOREIGN COUNTRIES. 11 

count, or reward upon condition that that person deals, or 
in consideration of that person having dealt, with the 
defendant to the exclusion of other persons dealing in 
similar goods or services. 

(2) In determining whether the competition is unfair, 
regard shall be had to the management, the processes, the 
plant, and the machinery employed or adopted in the 
Australian industry affected by the competition being 
reasonably efficient, effective, and up to date. 

7. (1) Any person who monopolizes or attempts to mo- 
nopolize, or combines or conspires with any other person 
to monopolize, any part of the trade or commerce with 
other countries or among the States, is guilty of an indict- 
able offense. 

Penalty, £500 for each day during which the offense 
continues, or one year's imprisonment, or both ; or, in the 
case of a corporation, £1,000 for each day during which 
the offense continues. 

(2) Every contract made or entered into in contra- 
vention of this section shall be absolutely illegal and void. 

(3) The attorney general may elect, instead of proceed- 
ing by indictment for an offense against this section, to 
institute proceedings in the high court by way of civil 
action for the recovery of the pecuniary penalties for the 
offense; in which case the action shall be tried before a 
justice of that court without a jury. 

TA. (1) Any person who, in relation to trade or com- 
merce with other countries or among the States, either as 
principal or agent, in respect of dealings in any goods or 
services gives, offers, or promises to any other person any 
rebate, refund, discount, concession, or reward for the 
reason, or upon the condition, express or implied, that the 
latter person (a) deals, or has dealt, or will deal, or in- 
tends to deal exclusively with any person, either in rela- 
tion to any particular goods or services or generally; or 
(b) deals, or has dealt, or will deal, or intends to deal, 
exclusively, with members of a commercial trust, either 
in relation to any particular goods or services or gener- 
ally; or (c) does not deal, or has not dealt, or will not 
deal, or does not intend to deal with certain persons, 
either in relation to any particular goods or services or 
generally; or (d) is or becomes a member of a commercial 
trust ; is guilty of an offense. 

Penalty, £500. 

(2) Every contract made or entered into in contraven- 
tion of this section shall be absolutely illegal and void. 

(3) It shall be a defense to a prosecution under this 
section, and an answer to an allegation that a contract 
was made or entered into in contravention of this section, 
if the party alleged to have contravened this section 
proves that the matter or thing alleged to have been done 
in contravention of this section was not to the detriment 
of the public, and did not constitute competition whicji 



12 TRUSTS IN FOREIGN COUNTRIES. 

was unfair in the circumstances, and was not destructive 
of or injurious to any Australian industry. 

7B. Any person who, in relation to trade and commerce 
with other countries or among the States, either as prin- 
cipal or agent, refuses either absolutely or except upon 
disadvantageous conditions to sell or supply to any other 
person any goods or services for the reason that the latter 
person (a) deals, or has dealt, or will deal, or intends to 
deal with any person; or (b) deals, or has dealt, or will 
deal, or intends to deal with persons who are not members 
of a commercial trust; or (e) is not a member of a, com- 
mercial trust ; is guiltv of an offense. 

Penalty, £500. 

(Section 8 repealed.) 

9. Whoever aids, abets, counsels, or procures, or by act 
or omission is in any way, directly or indirectly, know- 
ingly concerned in or privy to (a) the commission of any 
offense against this part of this act; or (b) the doing of 
any act outside Australia which would, if done within 
Australia, be an offense against this part of this act ; shall 
be deemed to have committed the offense. 

Penalty, £500. 

10. (1) The attorney general, or any person thereto 
authorized by him, may institute proceedings in the high 
court to restrain by injunction after hearing and deter- 
mining the merits and not by way of interlocutory order 
the carrying out of any contract made or entered into 
after the commencement of this act or any combination 
which (a) is in restraint of trade or commerce; or (b) is 
destructive or injurious, by means of unfair competition, 
to any Australian industry the preservation of which is 
advantageous to the Commonwealth, having due regard 
to the interests of producers, workers, and consumers. 

Provided, that this section shall only apply to con- 
tracts or combinations in relation to commerce with other 
countries or among the States. 

(2) On the conviction of any person for an offense 
under this part of this act the justice before whom the 
trial takes place shall, upon application by or on behalf 
of the attorney general or any person thereto authorized 
by him, grant an injunction restraining the convicted 
person and his servants and agents from the repetition or 
continuance of the offense of which he has been convicted. 

10A. (1) Any person who does any act or thing in 
disobedience of an injunction granted under this part of 
this act shall be guilty of an offense. 

Penalty, £500 for each clay during which the offense 
continues. 

(2) This section shall not be deemed to derogate from 
the power of the high court, apart from this section, to 
enforce obedience to the injunction. 

11. (1) Any person who is injured in his person or 
property by any other person, by reason of any act or 



TRUSTS IN FOREIGN COUNTRIES. 13 

thing done by that other person in contravention of this 
part of this act, or by reason of any act or thing done 
in contravention of any injunction granted under this 
part of this act, may, in the high court, before a justice, 
without a jury, sue for and recover treble damages for the 
injury. 

(2) No person shall, in any proceeding under this sec- 
tion, be excused from answering any question put either 
viva voce or by interrogatory, or from making any dis- 
covery of documents, on the ground that the answer or 
discovery may criminate or tend to criminate him; but 
his answer shall not be admissible in evidence against 
him in any criminal proceeding other than a prosecution 
for perjury. 

12. The juiy panel for the trial of any offense against 
this part of this act, or for the trial of any action or 
issue under this part of this act, shall be taken from the 
list of special jurors (if any) in the State or part of the 
Commonwealth in which the trial takes place. 

13. (1) Proceedings for the recovery of pecuniary pen- 
alties for offenses against this part of this act (other than 
indictable offenses or offenses against section 15B, section 
15C, or section 15E) shall be instituted in the high court 
by way of civil action and shall be tried before a justice 
of that court without a jury. 

(2) Any offense against this part of this act committed 
by the person who has previously been convicted of any 
offense against this part of this act shall be an indictable 
offense, punishable on conviction by a penalty not exceed- 
ing £500 or imprisonment for any term not exceeding one 
year, or both ; in the case of a corporation, by a penalty 
not exceeding £500. 

14. (1) No proceeding for an indictable offense or for 
the recovery of penalties shall be instituted under this 
part except by the attorney general or some person au- 
thorized by him. 

(2) No other proceeding shall be instituted under this 
part without the written consent of the attorney general. 

14A. In any proceeding for an offense against this 
part of this act, any indictment, information, statement of 
claim, conviction, warrant, or other process shall suffice 
if the offense is set forth as nearly as may be in the words 
of this act. 

14B. No person shall, in any proceeding for an offense 
against this part of this act, be excused from answering 
any question, put either viva voce or by interrogatory, 
or from making any discovery of documents, on the 
ground that the answer or discovery may tend to crimi- 
nate him or make him liable to a penalty ; but his answer 
shall not be admissible in evidence against him in any 
civil or criminal proceeding other than a proceeding for 
an offense against this act or a prosecution for perjury. 



14 TRUSTS IN FOREIGN COUNTRIES. 

14C. In any proceeding for an offense against this part 
of this act, wherein a combination or conspiracy or at- 
tempted combination or conspiracy in contravention of 
this act is alleged, any book, document, paper, or writing 
containing (a) any minute, note, record, or memorandum 
of any proceeding at any meeting of the persons or any of 
the persons alleged to have been parties or privy to the 
combination, conspiracy, or attempt; or (b) any entry 
purporting to be a copy of or extract from any such book, 
document, paper, or writing, shall, upon proof that it 
was produced by or came from the custody of those per- 
sons, or any of them, or of a responsible officer or a repre- 
sentative of those persons, or any of them, (1) be admis- 
sible in evidence against those persons; and (2) be evi- 
dence that the matter and things thereby appearing to 
have been done by those persons, or any of them, were so 
done, and that any person thereby appearing to have been 
present at the meeting was so present. 

14D. In any proceeding for an offense against this part 
of this act, any book, letter, document, paper, or writing, 
or anything purporting to be a copy of, or extract from, 
any book, letter, document, paper, or writing, containing 
any reference to any matter or thing alleged to be done 
in contravention of this act, shall, upon proof that it was 
produced by or came from the custody of a person 
charged with the offense, or a responsible officer or a rep- 
resentative of that person (a) be admissible in evidence 
against that person; and (b) be evidence of the matters 
and things thereby appearing, and that the book, letter, 
document, paper, or writing (or, in the case of a copy, 
that the original thereof) was written, signed, dispatched, 
and received by the persons by whom it purports to have 
been written, signed, dispatched, and received, and that 
any such copy or extract is a true copy of, or extract from, 
the original of or from which it purports to be a copy or 
extract. 

15. (1) Any person party to a contract or member of 
a combination or in any way concerned in carrying out 
the contract or the objects of the combination may (a) 
lodge with the attorney general a statutory declaration by 
himself, or in the case of a corporation by some one ap- 
proved of in that behalf by the attorney general, setting 
forth truly, fully, and completely the terms and particu- 
lars of the contract, or the purposes, objects, and terms of 
agreement or constitution of the combination, as the case 
may be, and an address in Australia to which notices may 
be sent by the attorney general; and (b) publish the 
statutory declaration in the Gazette. 

(2) The attorney general may at any time send notice 
to the person above mentioned (hereinafter called the de- 
clarant), to the address mentioned in the statutory decla- 
ration, that he considers the contract or combination 
likely to restrain trade or commerce to the detriment of 
the public, or to destroy or injure an Australian industry 
by unfair competition. 



TRUSTS IN FOREIGN COUNTRIES. 15 

(3) In any proceeding against the declarant in respect 
of any offense against section 4 of this act, alleged to have 
been committed by him in relation to the contract or com- 
bination after the time the statutory declaration has been 
lodged and published, and before any notice as aforesaid 
has been sent to him by the attorney general, it shall be 
deemed (but as regards the declarant only and not as 
regards any other person) that the declarant had no 
intent to contravene the provisions of the section if he 
proves that the statutory declaration contains a true, 
full, and complete statement of the terms and particulars 
of the contract, or the purposes, objects, and terms of 
agreement or constitution of the combination, as the case 
may be, at the date of the statutory declaration and at 
the date of the alleged offense. 

15A. In any prosecution for an offense against sec- 
tions 4, 7, 7A, 7B, or 9 of this act the averments of the 
prosecutor contained in the information declaration or 
claim shall be deemed to be proved in the absence of 
proof to the contrary, but so that (a) the averment in 
the information of intent shall not be deemed sufficient 
to prove such intent; and (b) in all proceedings for an 
indictable offense the guilt of the defendant must be 
established by evidence. 

15B. (1) If the comptroller general believes that an 
offense has been committed against this part of this act, 
or if a complaint has been made in writing to the comp- 
troller general that an offense has been committed against 
this part of this act and the comptroller general believes 
that the offense has been committed, he may bj writing 
under his hand require any person whom he believes to 
be capable of giving any information in relation to the 
alleged offense to answer questions and to produce docu- 
ments to him or to some person named by him in relation 
to the alleged offense. 

(2) Xo person shall refuse or fail to answer questions 
or produce documents when required to do so in pur- 
suance of this section. 

Penalty, £50. 

(3) The comptroller general or any person to whom 
any documents are produced in pursuance of this section 
may take copies of or extracts from those documents. 

(4) No person shall be excused from answering any 
questions or producing any documents when required to 
do so under this section on the ground that the answer to 
the question or the production of the document might 
tend to criminate him or make him liable to a penalty; 
but his answer shall not be admissible in evidence against 
him in any civil or criminal proceeding other than a pro- 
ceeding for an offense against this part of this act. 

15C. (1) Whenever a complaint on oath has been made 
in writing to the comptroller general that any person 
or any foreign corporation or any trading or financial 
corporation formed within the Commonwealth has been 
guilty of any offense against this part of this act. the 



16 TRUSTS IN FOREIGN COUNTRIES. 

comptroller general, if he believes the complaint to be 
well founded, may, by writing, require any such person 
or foreign corporation or trading or financial corporation 
or any member, officer, or agent of any such corporation, 
to produce and hand over to him or to some person ap- 
pointed by him in writing all books and documents relat- 
ing to the subject matter of the complaint and all books 
and documents of any kind whatsoever wherein any entry 
or memorandum appears in any way relating to the sub- 
ject matter of the complaint. 

(2) Every person or foreign corporation or trading or 
financial corporation, required by the comptroller general 
as aforesaid to produce to him or to some person ap- 
pointed by him in writing any books or documents shall 
forthwith produce and hand over such books or docu- 
ments accordingly. 

Penalty, £100. 

(3) The comptroller general or any person appointed 
by him in writing may inspect all books and documents 
produced in pursuance of this section and may make 
copies of or extracts from those books or documents. 

15D. The comptroller general may impound or retain 
any book or document produced to him or to any person 
so appointed by him in pursuance of the preceding sec- 
tion, but the person or corporation otherwise entitled to 
such book or document shall in lieu thereof be entitled to 
a copy certified as correct by the comptroller general, and 
such certified copy shall be receivable in all courts as evi- 
dence and of equal validity with the original. And until 
such certified copy is supplied the comptroller general 
may at such times and places as he shall think proper 
permit such person, or in the case of a corporation any 
person appointed for the purpose by the corporation, to 
inspect and take extracts from the books or documents so 
impounded or retained. 

15E. No person shall disclose any information gained 
by him in the exercise of the poAvers conferred by the last 
three preceding sections except (a) to the attorney gen- 
eral ; or some person authorized by him; (b) to the comp- 
troller general; (c) when giving evidence in any proceed- 
ing for an offense against this part of this act. 

Penalty, £50. 

Part III. — Prevention of Dumping} 

16. In this part of this act — 
" Justice " means a justice of the high court. 
" The comptroller general " means the comptroller 
general of customs. 

J Acts of the Commonwealth of Australia, 1901. No. 6 of 1901 — An 
act relating to the customs. (Assented to Oct. 3, 1901.) Part I — 
Introductory. 1. This act may be cited as the customs act of 1901. * * * 
50. No prohibited goods shall be imported. Penalty, £100. 



TRUSTS IX FOREIGN COUNTRIES. 17 

" Imported goods " and "Australian goods " include 
goods of those classes, respectively, and all parts or 
ingredients thereof. 

" Produced " includes manufactured, and " Producer " 
includes manufacturer. 

" Trade " includes production of every kind. 

"Industries" shall not include industries in which in 
the opinion of the comptroller general or justice as the 
case may be, the majority of workers do not receive ade- 
quate remuneration or are subject to unfair terms or con- 
ditions of labor or emplojanent. 

IT. Unfair competition has in all cases reference to 
competition with those Australian industries, the preser- 
vation of which, in the opinion of the comptroller general 
or a justice as the case may be, is advantageous to the 
Commonwealth, having due regard to the interests of pro- 
ducers, workers, and consumers. 

18. (1) For the purposes of this part of this act, com- 
petition shall be deemed to be unfair, unless the contrary 
is proved, if (a) under ordinary circumstances of trade 
it would probably lead to the Australian goods being no 
longer produced or being withdrawn from the market 
or being sold at a loss unless produced at an inadequate 
remuneration for labor; or (6) the means adopted by the 
person importing or selling the imported goods are, in 
the opinion of the comptroller general or a justice as the 
case may be, unfair in the circumstances; or (c) the 
competition would probably or does in fact result in an 
inadequate remuneration for labor in the Australian in- 
dustry; or (d) the competition would probably or does 
in fact result in creating any substantial disorganization 
in Australian industry or throwing workers out of em- 
ployment; or (e) the imported goods have been pur- 
chased abroad by or for the importer, from the manu- 
facturer or some person acting for or in combination with 
him or accounting to him, at prices greatly below their 
ordinar}^ cost of production where produced or market 
price where purchased; or (/) the imported goods are 
imported by or for the manufacturer or some person 
acting for or in combination with him or accounting to 
him, and are being sold in Australia at a price which is 
less than gives the person importing or selling them a 
fair profit upon their fair foreign market value, or their 
fair selling value if sold in the country of production, 
together with all charges after shipment from the place 
whence the goods are exported directly to Australia (in- 
cluding customs duty). 

(2) In determining whether the competition is unfair 
regard shall be had to the management, the processes, the 
plant, and the machinery employed or adopted in the 
Australian industry affected by the competition being 
reasonably efficient, effective, and up-to-date. 
C7S3S— 12 2 



18 TRUSTS IN FOREIGN COUNTRIES. 

19. (1) The comptroller general, whenever he has re- 
ceived a complaint in writing and has reason to believe 
that any person (hereinafter called the importer), either 
singly or in combination with any other person within or 
beyond the Commonwealth, is importing into Australia 
goods (hereinafter called imported goods) with intent 
to' destroy or injure any Australian industry by their sale 
or disposal within the Commonwealth in unfair competi- 
tion with any Australian goods, may certify to the min- 
ister accordingly. 

(2) The certificate of the comptroller general shall 
specify (a) the imported goods; (b) the Australian in- 
dustry and goods; (c) the importer; (<^)the grounds or 
unfairness in the competition; (e) the name, address, and 
occupation of any person (not being an officer of the pub- 
lic service) upon whose information he may have acted. 

(3) The comptroller general may add to his certificate 
a statement of such other facts as in his opinion ought to 
be specified to give the importer fair notice of the matters 
complained of. 

(4) The comptroller general shall, before making his 
certificate, give to the importer an opportunity to show 
cause why the certificate should not be made and furnish 
him with a copy of the complaint. 

(5) On receipt of the certificate the minister may (a) 
by order in writing* refer to a justice the investigation 
and determination of the question whether the imported 
goods are being imported with the intent alleged ; and if 
so, whether the importation of the goods should be pro- 
hibited, either absolutely or subject to any specified con- 
ditions or restrictions or limitations; (b) notify in the 
Gazette that the question has been so referred; and (c) 
forward to the justice a copy of the certificate. 

20. From the date of the Gazette notice until the pub- 
lication in the Gazette of the determination of the ques- 
tion by the justice, goods, the subject of the investigation, 
shall not be imported unless the importer (a) gives to the 
minister a bond with such sureties as the minister ap- 
proves, for such amount (not exceeding the true value of 
the goods for customs purposes) as the minister con- 
siders just and reasonable by way of precaution in the 
circumstances, and conditioned to be void if the justice 
determines the question in favor of the importer; or (b) 
gives such other security and complies with such other 
conditions as the minister approves; and those goods 
shall, if imported in contravention of this section, be 
deemed to be prohibited imports within the meaning of 
the customs act 1901, and the provisions of that act shall 
apply to the goods accordingly. 

21. (1) The justice shall proceed to expeditiously and 
carefully investigate arid determine the matter, and for 
the purpose of the proceeding shall have power to inquire 
as to any goods, things, and matters whatsoever which he 
considers pertinent, necessary, or material. 



TRUSTS IN FOREIGN COUNTRIES. 19 

(2) For the purpose of the proceeding the justice shall 
sit in open court, and shall have all the powers of a jus- 
tice in the exercise of the ordinary jurisdiction of the 
high court. He may, if he thinks fit and shall on the 
application of either party, state a case for the opinion of 
the full court upon any question of law arising in the 
proceeding. And he may, if he thinks fit at any stage 
of the proceeding, refer the investigation and determina- 
tion of the matter to the full court, which shall in that 
case have all the powers and functions of a justice under 
this part of this act. 

(3) The certificate of the comptroller general shall be 
prima facie evidence of facts by subsection (2) of section 
19 of this act, required to be specified therein. 

(4) In addition to the comptroller general and the im- 
porter the justice may, if he thinks fit, allow any person 
interested in importing imported goods to be represented 
at the investigation. 

(5) The justice shall be guided by good conscience and 
the substantial merits of the case, without regard to legal 
forms or technicalities, or whether the evidence before 
him is in accordance with the law of evidence or not. 

(6) No person shall in any proceeding before a justice 
be excused from answering any question or producing 
documents on the ground that the answer or production 
may criminate or tend to criminate him, but his answer 
shall not be admissible in evidence against him in any 
criminal proceeding other than a prosecution for perjury. 

(7) The justice shall forward his determination to 
the minister. 

(8) In the case of the following agricultural imple- 
ments: Plows of all kinds over 1J hundredweight, tine 
harrows, disk harrows, grain drills, combined grain-seed 
and manure drills, land rollers, cultivators, chaff cutters, 
seed cleaners, stripper harvesters, and any other imple- 
ment usually used in agriculture, the justice shall inquire 
into and determine the question whether the goods are 
being imported with the effect of benefiting the primary 
producers without unfairly injuring any other section 
of the community of the Commonwealth. 

(9) The determination of the justice shall be final and 
conclusive and without appeal and shall not be questioned 
in any way. 

22. (1) Upon the receipt of the determination of the 
justice the minister shall forthwith cause it to be pub- 
lished in the Gazette. 

(2) If the justice determines that the imported goods 
are being imported with the intent alleged, and that their 
importation should be prohibited either absolutely or 
subject to any specified conditions or restrictions or limi- 
tations of any kind whatsoever (a) the determination 
when so published shall have the effect of a proclamation 
under the customs act, 1901, prohibiting the importation 
of the goods either absolutely or subject to those condi- 



20 TRUSTS IN FOREIGN COUNTRIES. 

tions or restrictions or limitations as the case may be; 
and in that case the provisions of that act shall apply to 
goods so prohibited; and (b) the justice may by order 
reduce the amount recoverable under any bond given in 
pursuance of this part of this act to such sum as the 
importer satisfies him is reasonable and just in the 
circumstances. 

23. The governor general may at any time, by procla- 
mation, simultaneously with or subsequently to any pro- 
hibition under this part of this act, rescind in whole or 
in part the prohibition or any condition or restriction 
or limitation on importation imposed thereby. 

24. In all cases of prohibition the determination of the 
justice, and any proclamation affecting the same, shall 
be laid before both houses of the Parliament within 
seven days after the publication in the Gazette, or, if the 
Parliament is not then sitting, within seven days after 
the next meeting of Parliament. 

25. The justices of the high court or a majority of 
them may make rules of court not inconsistent with this 
act, for regulating the proceedings before a justice under 
this part of this act and for carrying this part of this 
act into effect. 

26. (1) Any person who willfully (a) makes to the 
comptroller general or to any officer of customs any 
false statement in relation to any action or proceedings 
taken or proposed to be taken under this part of this act ; 
or (b) misleads the comptroller general in any particu- 
lar likely to affect the discharge of his duty under this 
act shall be guilty of an offense. 

Penalty, £100 or 12 months' imprisonment. 

(2) Any person convicted under the last preceding sub- 
section may be ordered by the justice to whom a question 
is referred under this part of this act to pay the whole 
or part of the costs incurred by the importer in whose 
favor the question is determined. 

EXCISE TARIFF. 

[No. 16 of 1906.] 

AN ACT Relating to duties of excise. 1 
[Assented to Oct. 12, 1906.] 

Be it enacted by the King's Most Excellent Majesty, the 
Senate and the House of Representatives of the Com- 
monwealth of Australia, as follows: 
Short title. i. This act may be cited as the excise tariff, 1906. 
tie? XC on e agri- 2. Duties of excise shall on and from the 1st day of 
chlnirv 1 ™ a ~ January, 1907, be imposed on the dutiable goods specified 
in the schedule at the rates specified in the said schedule. 
Provided, That this act shall not apply to goods manu- 
factured by any person in any part of the Commonwealth 
under conditions as to the remuneration of labor which 

1 The act relating to agricultural machinery (No. 16 of 1906) was de- 
clared unconstitutional by the high court in July, 1908. 



chinery. 



TRUSTS IN FOREIGN COUNTRIES. 



21 



(a) are declared by resolution of both houses of the Par- 
liament to be fair and reasonable; or (b) are in accord- 
ance with an industrial award under the Commonwealth 
conciliation and arbitration act, 1904; or (c) are in ac- 
cordance with the terms of an industrial agreement filed 
under the Commonwealth conciliation and arbitration 
act. 1901; or (d) are, on an application made for the pur- 
pose to the president of the Commonwealth court of con- 
ciliation and arbitration, declared to be fair and reason- 
able by him or by a judge of the supreme court .of a State 
or any person or persons who compose a State industrial 
authority to whom he may refer the matter. 

The Schedule. 
Excise duties. 



Dutiable goods. 


Duties. 


FIXED RATES. 




£6 




do-... 


£3 




per pound.. 


7s. 8d. 


AD VALOREM RATES. 






Disk cultivators 


do 




Winnowers, horse and other power 

Combined corn sheller, husker, and bagger 

Combined corn sheller and husker 

Drills: 

Fertilizer 


do.... 

do.... 

do.... 

do.... 


m 


Seed 


..do ... 




Grain .... 


...do ... 


| 12£ 


And attachments thereto 

Plows , other 


do.... 

do.... 




Plowshares 


do.... 




Harrows 


.... do .. 




Chaff cutters and horse gear 


....do 




Cultivators, other than disk 


. do ... 


r 10 


Scarifiers 


..do 




Plow moldboards 


do .. 




Corn shellers 


do 




Corn huskers 


.. do ... 









EXEMPTIONS. 

Hand- worked rakes and plows combined. 

Hay tedders. 

Alaize harvesters. 

Maize binders. 

Maize planters. 

Moldboard plates in the rough and not cut into shape. 

Potato sorters. 

Potato raisers or diggers. 

(Commonwealth Acts: Australia, vol. 5, 1906, No. 16, p. 59.) 
THE PATENTS ACT 1903. 

[No. 21 of 1903. As amended by the patents act 1906 (No. 19 of 1906), 
and by the patents act 1909 (No. 17 of 1909.] 

AX ACT Relating to patents of inventions. 

[Assented to Oct. 22, 1903.] 

Part V. — IVorking of patents and compulsory licenses. 

87. (1) Any person interested may, after the expira- n c c e ^g lsor £ 
tion of two years from the granting of the patent, present Ed C w. n 7, e c.* 34, 
a petition to the commissioner alleging that the reason- s ' 2 ' 



22 TRUSTS IN FOREIGN COUNTRIES. 

able requirements of the public with respect to a patented 
invention have not been satisfied and praying for the 
grant of a compulsory license, or, in the alternative, for 
the revocation of the patent. 

(2) The commissioner shall consider the petition and 
if the parties do not come to an arrangement between 
themselves, the commissioner, if satisfied that a prima 
facie case has been made out, shall refer the petition to 
the high court or the supreme court, and if the commis- 
sioner is not so satisfied he may dismiss the petition. 

(3) Where any such petition is referred by the com- 
missioner to the high court or the supreme court, and it 
is proved to the satisfaction of the court that the reason- 
able requirements of the public with reference to the 
patented invention have not been satisfied, the patentee 
may be ordered, by rule or order, to grant licenses on such 
terms as the said court thinks just, or if the court is of 
opinion that the reasonable requirements of the public 
will not be satisfied by the grant of licenses the court 
may order the revocation of the patent. 

Provided, that no order of revocation shall be made 
before the expiration of three years from the date of the 
patent or if the patentee gives satisfactory reasons for 
his default. 

(4) On the hearing of any petition under this section 
the patentee, and any person claiming an interest in the 
patent as exclusive licensee or otherwise, shall be made 
parties to the proceedings, and the commissioner shall be 
entitled to appear and be heard. 

Subsec. (5)* * * * * 

omitted ; No. 

17, 1909, s 14. (g) For the purposes of this section the reasonable re- 
29, s. 24 (5)' ' quirements of the public shall not be deemed to have been 
Substituted satisfied (a) if, by reason of the default of the patentee 
i?09, s°'i4. ' (1) to manufacture to an adequate extent and supply on 
reasonable terms, the patented article or any parts thereof, 
which are necessary for its efficient working, or (2) to 
carry on the patented process to an adequate extent, or 
(3) to grant licenses on reasonable terms; any existing 
trade or industry, or the establishment of any new trade 
or industry, in Australia is unfairly prejudiced; or the 
demand for the patented article or the article produced 
by the patented process is not reasonably met; or (b) if 
any trade or industry in Australia is unfairly prejudiced 
by the conditions attached by the patentee, before or 
after the commencement of this subsection, to the pur- 
chase, hire, or use of the patented article, or to the using 
or working of the patented process. 

(7) A rule or order directing the grant of any license 
under this section shall, without prejudice to any other 
method of enforcement, operate as if it were embodied in 
a deed granting a license and made between the parties to 
the proceeding. 



TRUSTS IN FOREIGN COUNTRIES. 23 

87a. (1) At any time not less than four years after the ^^J ^ 1 ™ 
date of a patent, and not less than two years after the is not worked 
commencement of this section, any person may apply to extent ad in qu the 
the high court or the supreme court for an order declar- J^jJ m ° a * 
ing that the patented article or process is not manufac- 
tured or carried on to an adequate extent in the Common- 
wealth. 

(2) If, on the hearing of the application, the court is inserted by 
satisfied that the patented article or process is manufac- s .°i5. ' 
tured or carried on exclusively or mainly outside the Com- 
monwealth, then, subject to the provision of this section, 

and unless the patentee proves that the article or process 
is manufactured or carried on to an adequate extent in 
the Commonwealth, or gives satisfactory reasons why the 
articles or process is not so manufactured or carried on, 
it shall make the order applied for, to take eifect either 
(a) forthwith or (b) at the expiration of such reasonable 
time as is specified in the order, unless in the meantime it 
is shown to the satisfaction of the court that the patented 
article or process is manufactured or carried on to an 
adequate extent in the Commonwealth : 

Provided, that no such order shall be made which is at 
variance with any treaty, convention, arrangement, or en- 
gagement with any foreign country or part of the King's 
dominions. 

(3) If, within the time specified in the order, the pat- 
ented article or process is not manufactured or carried on 
to an adequate extent in the Commonwealth, but the pat- 
entee gives satisfactory reasons why it is not so manu- 
factured or carried on, the court may make a further 
order extending the time so specified for any specified 
time not exceeding 12 months. 

(4) From and after the time when an order under sub- 
section (2) of this section takes effect the patent shall not 
be deemed to be infringed by the manufacture or carry- 
ing on in the Commonwealth of the patented article or 
process or by the vending within the Commonwealth of 
the patented article made within the Commonwealth. 

(5) If at any time after the making of an order under 
subsection (2) of this section the court is satisfied that 
the patented article or process is not manufactured or 
carried on in the Commonwealth by any other person than 
the patentee, and that the patentee is manufacturing it or 
carrying it on to an adequate extent in the Common- 
wealth, the court may in its discretion, if it thinks it just 
so to do, revoke the order, which shall thenceforth cease 
to have effect. 

(6) In any case in which the court is empowered by 
this section to make an order under subsection (2) there- 
of, it may. in its discretion, if it thinks it just so to do, 
instead of making such an order, order the patentee to 
grant a compulsory license to the applicant on such terms 
as the court thinks just. 



24 TRUSTS IN FOREIGN COUNTRIES. 

(7) In any proceedings under this section the court 
may make such order as to costs as it thinks just, and 
may order the applicant to give such security as it thinks 
just for the costs of the proceedings and of any appeal 
therefrom, and in default of such security being given 
within the time specified by the order the proceedings or 
appeal shall be deemed to be abandoned. 
certffn da ?o C nd i f 8 ^- (1) It shall not be lawful in any contract made 
tions attached after the commencement of this section in relation to the 
etc., o/patent- sale or lease of, or license to use or work, any article or 
Edw. r 7 c' 29 P rocess protected by patent, to insert a condition the 
s. 38. ' ' 'effect of which would be (a) to prohibit or restrict the 
No. n i7, r i e 909, s y purchaser, lessee, or licensee from using any article or 
15 - class of articles or process, whether patented or not, sup- 

plied or owned by any person other than the seller, lessor, 
or licensor, or his nominees; or (b) to require the pur- 
chaser, lessee, or licensee to acquire from the seller, lessor, 
or licensor, or his nominees, any article or class of articles 
not protected by the patent ; and any such condition shall 
be null and void : 

Provided, that this subsection shall not apply if (1) 
the seller, lessor, or licensor proves that, at the time the 
contract was entered into, the purchaser, lessee, or licensee 
had the option of purchasing the article or obtaining a 
lease or license on reasonable terms, without any such 
condition; and (2) 'the contract entitles the purchaser, 
lessee, or licensee to relieve himself of his liability to 
observe any such condition on giving the other party three 
months" notice in writing, and on pa} T ment in compensa- 
tion for such relief in the case of a purchase of such sum, 
or in the case of a lease or license of such rent or royalty 
for the residue of the term of the contract, as may be fixed 
by an arbitrator appointed by the minister. 

(2) Any contract relating to the lease of or license to 
use or work any patented article or patented process, 
whether made before or after the commencement of this 
section, may at any time after the patent or all the patents 
by which the article or process was protected at the time 
of the making of the contract has or have ceased to be in 
force, and notwithstanding anything in the same or in any 
other contract to the contrary, be determined by either 
party on giving three months' notice in writing to the 
other party. 

(3) Any contract made before the commencement of 
this section relating to the lease of or license to use or 
work any patented article or process, and containing any 
condition which, had the contract been made after the 
commencement of this section, would by virtue of this 
section have been null and void, may, at any time before 
the contract is determinable under the last preceding sub- 
section, and notwithstanding anything in the same or 
any other contract to the contrary, be determined by 
either party on giving three months' notice in writing to 
the other party. 



TKUSTS IN FOREIGN COUNTRIES. 25 

(4) Where under either of the two last preceding sub- 
sections any notice is given determining a contract made 
before the commencement of this section, the party giving 
the notice shall be liable to pay such compensation as, 
failing agreement, may be awarded by an arbitrator 
appointed by the minister. 

(5) The insertion by the patentee in a contract, made 
after the commencement of this section, of any condi- 
tion which by virtue of this section is null and void, shall 
be available as a defense to an action for infringement 
of the patent, to which the contract relates, brought while 
that contract is in force. 

(6) Nothing in this section shall (a) affect any con- 
dition in a contract whereby a person is prohibited from 
selling any goods other than those of a particular person ; 
or (b) be construed as validating any contract which 
would, apart from this section, be invalid; or (c) affect 
any right of determining a contract or condition in a 
contract exercisable independently of this section; or 
(d) affect any condition in a contract for the lease of or 
license to use a patented article, whereby the lessor or 
licensor reserves to himself or his nominees the right to 
supply such new parts of the patented article as may be 
required to put or keep it in repair. 

(Australia, Commonwealth Acts, 1909, vol. 8, The 
Patents Act, Pt. V, pp. 269 to 273.) 



CANADA. 

CRIMINAL LAW OF CANADA RELATIVE TO RE- 
STRAINTS OF TRADE AND COMPETITION. 

OFFENSES CONNECTED WITH TRADE AND BREACHES OF 
CONTRACT. 



Conspiracy 
in restraint of 
trade. 



Acts in re- 
straint not un- 
lawful. 



Penalty for 
conspiracy. 



To limit 
transportation 
facilities. 



Restrain 
commerce. 



Lessen man- 
ufacturing. 



Lessen com- 
petition. 



Saving. 



496. A conspiracy in restraint of trade is an agreement 
between two or more persons to do or procure to be done 
any unlawful act in restraint of trade. (55-56 V., c. 29, 
s. 516.) 

497. The purposes of a trade union are not, by reason 
merely that they are in restraint of trade, unlawful within 
the meaning of the last preceding section. (55-56 V., 
c. 29, s. 517.) 

498. Every one is guilty of an indictable offense and 
liable to a penalty not exceeding $4,000 and not less than 
$200, or to two years' imprisonment, or, if a corporation, 
is liable to a penalty not exceeding $10,000 and not less 
than $1,000, who conspires, combines, agrees, or arranges 
with any other person, or with any railway, steamship, 
steamboat, or transportation company — 

(a) To unduly limit the facilities for transporting, 
producing, manufacturing, supplying, storing, or dealing 
in any article or commodity which may be subject of 
trade or commerce ; or, 

(b) To restrain or injure trade or commerce in relation 
to any such article or commodity ; or, 

(c) To unduly prevent, limit, or lessen the manufac- 
ture or production of any such article or commodity, or 
to unreasonably enhance the price thereof; or, 

(d) To unduly prevent or lessen competition in the 
production, manufacture, purchase, barter, sale, trans- 
portation, or supply of any such article or commodity, 
or in the price of insurance upon person or property. 

2. Nothing in this section shall be construed to apply 
to combinations of workmen or employees for their own 
reasonable protection as such workmen or employees. 
(63-64 V., c. 46, s. 3.) 

(Revised Statutes of Canada, 1906, Vol. Ill, chap. 146, 
sees. 496-498, p. 2549.) 



CANADIAN LEGISLATION CONCERNING PATENTS. 

vaSdity of°c n er! 42. The validity of any patent granted before the 13th 
wanted P bef Sri da y of August, 1903. shall not be impeached, nor shall 
Aug. 13, 1903. such patent be deemed to have lapsed or expired by rea- 
son of the failure of the patentee to construct or maiiu- 
26 



TKUSTS IN FOREIGN COUNTRIES. 27 

fact ure the patented invention, if the patentee within the 
period of two years from the date of the patent allowed 
for such construction or manufacture, or within an au- 
thorized extension of that period, became, and at all 
times thereafter continued to be, ready either to furnish 
the patented invention himself or to license the right of 
using it, on reasonable terms, to any person desiring to 
use it, and if the patentee, or his legal representatives, 
within six months from the 13th dav of August, 1903, 
had— 

(a) Commenced, and after such commencement con- 
tinuously carried on in Canada, the construction or 
manufacture of the patented invention in such manner 
as to enable any person desiring to use it to obtain it, or 
cause it to be made for him, at a reasonable price, at some 
manufactory or establishment for making or constructing 
it in Canada : or, 

(b) Applied for and thereupon obtained an order of 
the commissioner making the patent subject to the con- 
dition hereinafter provided for authorizing application . 
for the issue of licenses to make, construct, use, and sell 
the patented invention. (3 E. VII., c. 46, s. 10.) 

43. In the case of any patent which before the 13th day th 5 d ! g persons 
of August, 1903, had become void or the validity of saved - 
which might have been impeached, and which was re- 
vived or protected from impeachment by any provision 

of the act, passed in the third year of His Majesty's 
reign, chapter 46, entituled "An act to amend the patent 
act," or which, by reason of any such provision, is to be 
deemed not to have elapsed or expired, any person who 
had, between the time when such patent became void or 
the ground for such impeachment arose, and the 13th day 
of August, 1903, aforesaid, commenced to manufacture, 
use, or sell in Canada the invention covered by such pat- 
ent, may continue to manufacture, use, or sell it in as full 
and ample a measure as if such revival or protection from 
impeachment had not been effected ; and, in case any per- 
son had, before the 13th day of August aforesaid, con- 
tracted with the owner of the patent for the right to 
manufacture, use, or sell such invention in Canada, the 
contract shall be deemed to have remained in full force 
and effect, notwithstanding that the patent had become 
void as aforesaid, unless the person who had so con- 
tracted with such owner can show that in the meantime, 
by reason or on the faith of such invalidity or lapsing, he 
has materially altered his position with respect to such 
invention, and that the revival of such contract would 
cause him damage. (3 E. VII., c. 46, s. 14.) 

44. On the application of the applicant for a patent wh ^ C b n ma tio t>e 
previous to the issue thereof, or on the application within siibSituteJ 
six months after the issue of a patent of the patentee or 

his legal representatives, the commissioner, having regard 
to the nature of the invention, may order that such patent 



28 TRUSTS IN FOREIGN COUNTRIES. 

instead of being subject to the condition with respect to 
the construction and manufacture of the patented inven- 
tion hereinbefore provided, shall be subject to the follow- 
ing conditions, that is to say : 
tw^Jv, 11 ™™™ (a) Any person, at any time while the patent continues 

by any person . \ / J r ? J . . r 

to use patent, m force, may apply to the commissioner by petition ior 
a license to make, construct, use, and sell the patented 
invention, and the commissioner shall, subject to general 
rules which may be made for carrying out this section, 
hear the person applying and the owner of the patent^ 
and, if he is satisfied that the reasonable requirements or 
the public in reference to the invention have not been 
satisfied by reason of the neglect or refusal of the patentee 
or his legal representatives to make, construct, use or 
sell the invention, or to grant licenses to others on reason- 
able terms to make, construct, use, or sell the same, may 
order of make an order under his hand and the seal of the Patent 

commissioner. Qfg ce re q U i r i n g the owner of the patent to grant a license 
to the person applying therefor, in such form, and upon 
such terms as to the duration of the license, the amount 
of the royalties, security for payment, and otherwise, as 
the commissioner, having regard to the nature of the 
invention and the circumstances of the case ; deems just ; 
Assessors. (ft) The commissioner may, if he thinks fit, and shall 

on the request of either of the parties to the proceedings, 
call in the aid of an assessor, specially qualified, and hear 
the case wholly or partially with his assistance ; 

one 1 licence ( c ) The existence of one or more licenses shall not be a 

maybe granted. Dar to an order by the commissioner for or to the grant- 
ing of a license on any application under this section; 
and, 

P a F t°e n t tu f e o°r ( d ) The P atent and a11 rights and privileges thereby 

refusal to grant granted shall cease and determine, and the patent shall 
be null and void, if the commissioner makes an order 
requiring the owner of the patent to grant any license, 
and the owner of the patent refuses or neglects to comply 
with such order within three calendar months next after 
a copy of it is addressed to him or to his duly authorized 
agent. (3 E. VII, c. 46, s. 7.) 
References 45. Any question which arises as to whether a patent, 

chequer court, or any interest therein, has or has not become void under 
any of the provisions of the seven last preceding sections 
of this act, may be adjudicated upon by the exchequer 
court of Canada, which court shall have jurisdiction to 
decide any such questions upon information in the name 
of the attorney general of Canada, or at the suit of any 
person interested ; but this section shall be not held to 
jurisdiction take away or affect the jurisdiction which any court other 

of other courts. thaR th(J excheqiier court f Canada possesses. (3 E. VII, 

c. 46, s. 8.) 

(Revised Statutes of Canada, 1906, Vol. II, chap. 69, 
sees. 42,43,44, and 45.) 



TRUSTS IN FOREIGN COUNTRIES. 29 

CONCERNING BOOKS. 

28. If a book as to which there is subsisting copyright ow I 1 f er co 1 p i ^j 1 |^ 
under this act has been first lawfully published in any ?^?oduction S fn 
part of His Majesty's dominions, other than Canada, and Canada - 

if it is proved to the satisfaction of the minister that the 
owner of the copyright so subsisting and of the copyright 
acquired by such publication has lawfully granted a 
license to reproduce in Canada, from movable or other 
types, or from stereotype plates, or from electroplates, or 
from lithograph stones, or by any process for facsimile 
reproduction, an edition or editions of such book designed 
for sale only in Canada, the minister may, notwithstand- p^ilbiffrnpoJ- 
ing anything in this act, by order under his hand, pro- tation. 
hibit the importation into Canada, except Avith the writ- 
ten consent of the licensee, of any copies of such book 
printed elsewhere ; provided that two such copies may be Proviso. 
specially imported for the bona fide use of any public 
free library or any university or college library, or for the 
library of any duly incorporated institution or society 
for the use of the members of such institution or society. 
(63-64 V, c. 25, s. 1.) 

29. The minister may at any time in like manner, by Suspension 
order under his hand, suspend or revoke such prohibition prohibition 0110 
upon importation if it is proved to his satisfaction that — 

(a) The license to reproduce in Canada has terminated 
or expired ; or 

(b) The reasonable demand for the book in Canada is 
not sufficiently met without importation; or 

(c) The book is not, having regard to the demand 
therefor in Canada, being suitably printed or published; 
or 

(d) Any other state of things exists on account of 
which it is not in the public interest to further prohibit 
importation. (63-64 V, c. 25, s. 2.) 

30. At any time after the importation of a book has Licensee, if 
been so prohibited, any person resident or being in Can- furnish copy of 
ada may apply, either directly or through a bookseller an ? edition - 
or other agent, to the person so licensed to reproduce such 

book, for a cop} 7 of any edition of such book then on sale 
and reasonably obtainable in the United Kingdom or any 
other part of His Majest} 7 's dominions, and it shall there- 
upon be the duty of the person so licensed, as soon as rea- 
sonably may be, to import and sell such copy to the per- 
son so applying therefor, at the ordinary selling price of 
such copy in the United Kingdom, or such other part of 
His Majesty's dominions, with the duty and reasonable 
forwarding charges added. 

2. The^ failure or neglect, without lawful excuse, of the otherwise 
person so licensed to supply such copy within a reasonable £Jy ^revoked! 
time shall be a reason for which the minister may, if he 
sees fit. suspend or revoke the prohibition upon importa- 
tion. (63-64 V, c. 25, s. 3.) 

(Revised Statutes of Canada. Vol. II, 1906. chap. 70, , 
sees. 28, 29, 30.) 



30 TRUSTS IN FOREIGN COUNTRIES. 

LICENSES. 

17. No person, unless licensed as herein provided, shall 
wMch may e not carry on the business or trade of a distiller, rectifier, com- 
be carried on pounder, brewer or malster, manufacturer of tobacco or 
license. cigars, or bonded manufacturer, or use any utensil, ma- 

chinery, or apparatus suitable for carrying on any such 
trade or business, or any business subject to excise, or im- 
port, make, or begin to make any still, rectifier, or other 
apparatus suitable for the manufacture of wash, beer, or 
spirits, or for the rectification or compounding of spirits. 
(R. $., c. 34, s. 9.) 

(Revised Statutes of Canada, 1906, Vol. II, chap. 51, 
sec. 17.) 

[4 Edward VII, Chap. 17.] 

AN ACT To amend the inland revenue act. 

[Assented to Aug. 10, 1904.] 

His Majesty, by and with the advice and consent of 
the Senate and House of Commons of Canada, enacts as 
follows : 
New^ect'iJn' *-• ^ ne i n l an d revenue act, chapter 34 of the Revised 
' Statutes, is amended by inserting the following section 
immediately after section 96 : 
forfe e it S ed to ?n "96a. The minister of inland revenue may declare 
case of sale or forfeited any license authorized by this act in any case 
g°o oS n s m under where a person who, being a manufacturer of any class 
dit£ns tive ° on °^ goods subject to a duty of excise, either directly or 
indirectly (a) makes a sale of any such goods, or consigns 
them for sale upon commission, to another person, sub- 
ject to the condition that the purchaser or the consignee 
shall not sell or deal in goods of a like kind produced by, 
or obtained or to be obtained from, any other manu- 
facturer or dealer; or (b) makes a sale of any such goods, 
or consigns them for sale upon commission, to another 
person, upon such terms as would, in their application, 
give more profit to the purchaser or the consignee if he 
should not sell or deal in goods of a like kind produced 
by, or obtained or to be obtained from, any other manu- 
Noticeof for- facturer or dealer, and the collector of inland revenue 
feiture. shall thereupon cause a notice of such forfeiture to be 

c o n s e - forthwith inserted in The Canada Gazette, and from and 
fe U itui-e S ° f for " after the insertion thereof the license shall be null and 
void, and no new license shall be granted to such person, 
and no license shall be granted to any other person for 
carrying on any business in the premises occupied by 
him until the minister of inland revenue is satisfied that 
the dealings above referred to have ceased. 
Decision of " 2. The decision of the minister of inland revenue as 
minis ei o e ^ Q w } ie t} ier an y sa ] e or consignment of goods is, or is not, 
subject to any such conditions, or upon any such terms, 



TKUSTS IN FOREIGN COUNTRIES. 31 

as is or are defined in subsection 1 of this section shall 
be final." 

(Statutes of Canada, 4 Edw. VII, 1904, Vols. I and II, 
chap. 17.) 

POAVER OF THE GOVERNOR IN COUNCIL TO REDUCE DUTIES OR 
PEACE ON FREE LIST. 



18. Whenever the governor in council has reason to be- . *^ uil 'y b ? 
lieve that with regard to any article of commerce there JU 
exists any trust, combination, association, or agreement 
of any kind among manufacturers of the article or deal- 
ers therein to unduly enhance the price of the article, or 
in any other way to unduly promote the advantage of 
the manufacturers or dealers at the expense of the con- 
sumers, the governor in council may commission or em- 
power any judge of the supreme court of Canada or of 
the exchequer court of Canada, or of any superior court 
in any Province of Canada, to inquire in a summary way 
into and report to the governor in council whether such 
trust, combination, association, or agreement exists. 

2. The judge may compel the attendance of witnesses, Evidence. 
and examine them under oath, and require the produc- 
tion of books and papers, and shall have such other neces- 
sary powers as are conferred upon him by the governor 

in council for the purposes of such inquiry. 

3. If the judge reports that such trust, combination, Report. 
association, or agreement exists, and if it appears to the 
governor in council that the disadvantage to the consum- 
ers is facilitated by the duties of customs imposed on a 

like article when imported, then the governor in council 
shall place the article on the free list, or so reduce the 
duty on it as to give to the public the benefit of reason- 
able competition in such article. (GO-61 V., c. 10, s. 18.) 
(Eevised Statutes of Canada, 1906, Vol. 1, p. 834.) 
12. Whenever, from or as a result of a -judgment of Combines 

,i , i , j. ,-v t /.and eonspira- 

the supreme court or exchequer court ol Canada, or ofcies. 
any superior court, or circuit, district, or county court in 
Canada, it appears to the satisfaction of the governor in 
council that with regard to any article of commerce there 
exists any conspiracy, combination, agreement, or ar- 
rangement of any kind among manufacturers of such ar- 
ticles or dealers therein to unduly promote the advantage 
of the manufacturers or dealers at the expense of the con- 
sumers, the gOA^ernor in council may admit the article 
free of duty, or so reduce the duty thereon as to give the 
public the benefit of reasonable competition in the article, 
if it appears to the governor in council that such disad- g0 ^°^ n e r r s f* 
vantage to the consumer is facilitated by the duties of council, 
customs imposed on a like article. 

( Repealed by sec. 47, combines investigation act. 1910.) 
2. Whenever the governor in council deems it to be in • u j°^ lliry b y 
the public interest to inquire into any conspiracy, combi- " ,u 



32 



TRUSTS IN FOREIGN COUNTRIES. 



nation, agreement, or arrangement alleged to exist among 
manufacturers or dealers in any article of commerce to 
unduly promote the advantage of the manufacturers or 
dealers in such article at the expense of the consumers, the 
governor in council may commission or empower any 
judge of the supreme court, or of the exchequer court of 
Canada, or of any superior court or county court in Can- 
ada, to hold an inquiry in a summary way and report to 
the governor in council whether such conspiracy, combi- 
nation, agreement, or arrangement exists. 

3. The judge may compel the attendance of witnesses 
and examine them under oath and require the production 
of books and papers, and -shall have such other necessary 
powers as are conferred upon him by the governor in 
council for the purpose of such inquiry. 

4. If the judge reports that such conspiracy, combina- 
tion, agreement, or arrangement exists in respect of such 
article, the governor in council may admit the article free 
of duty, or so reduce the duty thereon as to give to the 

Powers of p UD lic the benefit of reasonable competition in the article, 
council 11 there- if it appears to the governor in council that such disad- 
from ' vantage to the consumer is facilitated by the duties of 

customs imposed on a like article. 

(Canada, The Customs Tariff, 1907, chap. 11, sec. 12.) 



Evidence. 



Report 
judge. 



1 



COMBINES INVESTIGATION ACT. 

[9-10 Edward VII, chap. 9.] 

AN ACT To provide for the investigation of combines, monopolies, 
trusts, and mergers. 

[Assented to May 4, 1910.] 



Short title. 



His Majesty, by and with the advice and consent of 
the Senate and House of Commons of Canada, enacts 
as follows : 

1. This act may be cited as the " combines investigation 
act." 

INTERPRETATION. 



Definitions. 



Combine. 



2. In this act, unless the context otherwise requires — 
Application. (#) "Application " means an application to a judge 
for an order directing an investigation under the provi- 
sions of this act ; 

(b) "Board" means a board of investigation estab- 
lished under the provisions of this act; 

(c) " Combine " means any contract, agreement, ar- 
rangement, or combination which has, or is designed to 
have, the effect of increasing or fixing the price or rental 
of any article of trade or commerce or the cost of the 
storage or transportation thereof, or of the restricting 
competition in or of controlling the production, manufac- 
ture, transportation, storage, sale, or supply thereof, to 
the detriment of consumers or producers of such article 



TRUSTS IN FOREIGX COUNTRIES. 33 

of trade or commerce, and includes the acquisition, leas- 
ing, or otherwise taking over, or obtaining by any per- 
son to the end aforesaid, of any control over or interest 
in the business or any portion of the business of any 
other person, and also includes what is known as a trust, 
monopoly, or merger; 

(d) "Department" means the department of labor; Department 

(e) " Judge '' means, in the Province of Ontario, any judge, 
judge of the high court of justice ; in the Province of Que- 
bec, any judge of the superior court; in the Provinces of 
Nova Scotia. New Brunswick, British Columbia, Prince 
Edward Island, Saskatchewan, and Alberta, any judge 

of the supreme court; in the Province of Manitoba, any 
judge of the court of King's bench; and in the Yukon 
Territory, any judge of the territorial court; 

(/) "Minister " means the minister of labor: Minister. 

(g) " Order " means an order of a judge under the Order, 
provisions of this act ; 

(h) "Prescribed" means prescribed by this act or by Prescribed. 
any rule or regulation made thereunder ; 

(i) " Kegistrar " means the registrar of boards of in- Registrar, 
vestigation appointed under this act. 

ADMINISTRATION. 

3. The minister shall have the general administration tio ^ dministra - 
of this act. 

4. The governor in council shall appoint a registrar of Registrar of 
boards of investigation, who shall have the powers and 
perform the duties prescribed. 

(2) The office of registrar may be held either sepa- Appoint- 
rately or in conjunction with any other office in the public ?i n of Office* 611 
service, and in the latter case the registrar may, if the 
governor in council thinks lit, be appointed by reference 
to such other office, whereupon the person who for the 
time being holds such office or performs its duties shall, 
by virtue thereof and without thereby being entitled to 
any additional remuneration, be the registrar. 

ORDER FOR IX VESTIGATION. 



5. Where six or more persons, British subjects resident ^fL^ 1 " in ~ 
in Canada and of full age, are of opinion that a combine ve 
exists, and that prices have been enhanced or competition 
restricted by reason of such combine, to the detriment of 
consumers or producers, such persons may make an appli- 
cation to a judge for an order directing an investiga- 
tion into such alleged combine. 

(2) Such application shall be in writing addressed to Application 
the judge, and shall ask for an order directing an investi- for order " 
gation into the alleged combine, and shall also ask the 
judge to fix a time and place for the hearing of the appli- 
cants or their representative. 

67838—12 3 



34 TRUSTS IN FOREIGN COUNTRIES. 

P ii?JtSn. of ap " ( 3 ) The application shall be accompanied by a state- 
ment setting forth — 

(a) The nature of the alleged combine and the persons 
believed to be concerned therein ; 

(b) The manner in which the alleged combine affects 
prices or restricts competition, and the extent to which 
the alleged combine is believed to operate to the detri- 
ment of consumers or producers ; 

(c) The names and addresses of the parties making the 
application and the name and address of one of their 
number or of some other person whom they authorize to 
act as their representative for the purposes of this act 
and to receive communications and conduct negotiations 
on their behalf. 

ef?|piicaBts° n W ^he application shall also be accompanied by a 
statutory declaration from each applicant declaring that 
the alleged combine operates to the detriment of the. 
declarant as a consumer or producer, and that to the best 
of his knowledge and belief the combine alleged in the 
statement exists and that such combine is injurious to 
trade or has operated to the detriment of consumers or 
producers in the manner and to the extent described, 
and that it is in the public interest that an investigation 
should be had into such combine. 
appnJatfon. ° f 6 : ^ itn ^ n 10 days after the judge receives the appli- 
cation he shall fix a time and place for hearing the appli- 
cants and shall send due notice, by registered letter, to 
the representative authorized by the statement to receive 
communications on behalf of the applicants. At such 
hearing the applicants msij appear in person or by their 
representative or by counsel, 
vefti^ation by ^' ^ upon such hearing the judge is satisfied that there 
judge.' is reasonable ground for believing that a combine exists 

which is injurious to trade or which has operated to the 
detriment of consumers or producers, and that it is in the 
public interest that an investigation should be held, the 
judge shall direct an investigation under the provisions 
of this act; or if not so satisfied, and the judge is of 
ment d foi^fifr- °P m i° n that * n ^ ne circumstances an adjournment should 
ther evidence, be ordered, the judge may adjourn such hearing until 
further evidence in support of the application is given, 
or he may refuse to make an order for an investigation. 
Powers of (2) The judge shall have all the powers vested in the 
court of which he is a judge to summon before him and 
enforce the attendance of witnesses, to administer oaths, 
and to require witnesses to give evidence on oath or on 
solemn affirmation (if they are persons entitled to affirm 
in civil matters), and to produce such books, papers, or 
other documents or things as the judge deems requisite. 
Transmis- 8. The order of the judge directing an investigation 
and ev°iden ce d to shall be transmitted by him to the registrar by registered 
cegisti-ar. letter, and shall be accompanied by the application, the 
statement, a certified copy of any evidence taken before 
the judge, and the statutory declarations. The order 



TRUSTS IN FOREIGN COUNTRIES. 35 

shall state the matters to be investigated, the names of the 
persons alleged to be concerned in the combine, and the 
names and addresses of one or more of their number with 
whom, in the opinion of the judge, the minister should 
communicate in order to obtain the recommendation for 
the appointment of a person as a member of the board 
as hereinafter provided. 

APPOINTMENT OF BOARDS. 



9. Upon receipt by the registrar of the order directing of t!>a?d ntment 
an investigation the minister shall forthwith proceed to 

appoint a board. 

10. Every board shall consist of three members, who Constitution 
shall be appointed by the minister under his hand and ° 

seal of office. 

11. Of the three members of the board one shall be Members of 
appointed on the recommendation of the persons upon 

whose application the order has been granted, one on the 
recommendation of the persons named in the order as 
being concerned in the alleged combine, and the third on 
the recommendation of the two members so chosen. mm n 

1:2. The persons upon whose application the order has dation of third 
been granted and the persons named in the order as being member - 
concerned in the alleged combine, within seven days after 
being requested so to do by the registrar, may each re- 
spectively recommend the name of a person who is will- 
ing and ready to act as a member of the board, and the 
minister shall appoint such persons members of the board. 

(2) For the purpose of obtaining the recommendations ti0 nJ wmf^ep- 
ref erred to in subsection 1 of this section it shall be sum- resentatives of 
cient, as respects the applicants, for the registrar to com- par ies ' 
municate with the representative mentioned in the state- 
ment as authorized to receive communications on their 

behalf, and as respects the persons concerned in the 
alleged combine it shall be sufficient for the registrar to 
communicate with the persons named in the order as the 
persons with whom the minister should communicate for 
this purpose. 

(3) If the parties, or either of them, fail or neglect to when minis- 
make any recommendation within the said period, or members. se 
such extension thereof as the minister, on cause shown, 

grants, the minister shall, as soon thereafter as possible, 
select and appoint a fit person or persons to be a member 
or members of the board. 

(4) The two members so appointed may, within seven Recom men- 
days after their appointment, recommend the name of a pointment of P a 
judge of any court of record in Canada who is willing member! 3 third 
and ready to act as a third member of the board, and the 
minister shall appoint such judge as a member of the 

board, and if they fail or neglect to make a recommenda- 
tion within the said period, or such extension thereof as 
the minister on cause shown grants, the minister shall, 
as soon thereafter as possible, select and appoint a judge 



36 



TKUSTS IN FOREIGN COUNTEIES. 



Chairman. 



Vacancies. 



Persons dis- 
qualified as 
members. 



Notice of 
personnel of 
board. 



Oath of 
flee. 



of- 



of any court of record in Canada to be the third member 
of the board. 

(5) The third member of the board shall be its chair- 
man. 

(6) A vacancy in the membership of a board shall be 
filled in the same manner as an original appointment is 
made. 

13. No person shall act as a member of the board who 
is one of the applicants for the board or who has any 
direct pecuniary interest in the alleged combine that is 
the subject of investigation by such board, or who is not 
a British subject. 

14. As soon as possible after all the members of the 
board have been appointed by the minister the registrar 
shall notify the parties of the names of the chairman and 
other members of the board. 

15. Before entering upon the exercise of the functions 
of their office the members of the board shall take the 
following oath : 

I, , do solemnly swear — 

That I will truly, faithfully, and impartially perform 
my duties as a member of the board appointed to in- 
vestigate . 

That I am a British subject. 

That I have no direct pecuniary interest in the alleged 
combine that is to be the subject of investigation. 

That I have not received nor will I accept, either 
directly or indirectly, any perquisite, gift, fee, or gratuity 
from any person in any way interested in any matter or 
thing to be investigated by the board. 

That I am not immediately connected in business with 
any of the parties applying for this investigation, and 
am not acting in collusion with any person herein. 
f 16. The department may provide the board with a 
stenographer and such clerical and other assistance as to 
the minister appears necessary for the efficient carrying 
out of the provisions of this act. The department shall 
also repay any reasonable and proper disbursements made 
or authorized and certified by the judge who grants the 
order directing the investigation, 
mentor fn vet" ^ ' Upon the appointment of the board the registrar 
ligation. shall forward to the chairman copies of the application, 

statement, evidence, if any, taken before the judge, and 
order for investigation, and the board shall forthwith 
proceed to deal with the matters referred to therein. 



Clerical 
sis tan ce 
board. 



Disburse 
ments. 



INQUIRY AND REPORT. 



inquiry. \% % The board shall expeditiously, fully, and carefully 

inquire into the matters referred to it and all matters 
affecting the merits thereof, including the question of 
whether or not the price or rental of any article con- 
cerned has been unreasonably enhanced, or competition 
in the supply thereof unduly restricted, in consequence 



TKUSTS IN FOREIGN COUNTRIES. 37 

of a combine, and shall make a full and detailed report m 5fig° r fc t0 
thereon to the minister, which report shall set forth the 
various proceedings and steps taken by the board for the 
purpose of fully and carefully ascertaining all the facts 
and circumstances connected with the alleged combine, 
including such findings and recommendations as, in the 
opinion of the board, are in accordance with the merits 
and requirements of the case. 

(2) In deciding any question that may affect the scope ves s t ^ io ° n f in ' 
or extent of the investigation, the board shall consider 
what is required to make the investigation as thorough 
and complete as the public interest demands. 

19. The board's report shall be in writing, and shall be b oara P01 
signed b} r at least two of the members of the board. The 
report shall be transmitted by the chairman to the regis- 
trar, together with the evidence taken at such investiga- 
tion certified by the chairman, and any documents^ and 
papers remaining in the custody of the board. A minor- 
ity report may be made and transmitted to the registrar 
by anv dissenting member of the board. 

1 20. Upon receipt of the board's report and of the of £j J^* 1011 
minority report, if any, a copy thereof shall be sent free 
of charge to the parties and to the representative of any 
newspaper in Canada who applies therefor, and the 
report and minority report, if any, shall also be pub- 
lished without delay in the Canada Gazette. The min- of ?opta? ution 
ister may distribute copies of the report, and of any 
minority report, in such manner as to him seems most 
desirable, as a means of securing a compliance with the 
board's recommendations. The registrar shall, upon pay- tin^d^o f pies° er " 
ment of such fees as may be prescribed, supply a certified 
copy of any report or minority report to any person 
applying for it. 

21. Whenever, from or as a result of an investigation customs duties 
under the provisions of this act, or from or as a result of sSnaw" r coiripe" 
a judgment of the supreme court or exchequer court of tition. 
Canada or of any superior court, or circuit, district, or 

county court in Canada, it appears to the satisfaction of 
the governor in council that with regard to any article 
there exists any combine to promote unduly the advan- 
tage of the manufacturers or dealers at the expense of the 
consumers, and if it appears to the governor in council 
that such disadvantage to the consumer is facilitated by 
the duties of customs imposed on the article, or on any 
like article, the governor in council may direct either that 
such article be admitted into Canada free of duty or that 
the duty thereon be reduced to such amount or rate as 
will, in the opinion of the governor in council, give the 
public the benefit of reasonable competition. vocation 

22. In case the owner or holder of any patent issued of patent in 
under the patent act has made use of the exclusive rights certain cases - 
and privileges which, as such owner or holder he con- 
trols, so as unduly to limit the facilities for transporting, 
producing, manufacturing, supplying, storino-. or deal- 



38 TRUSTS IN FOREIGN COUNTRIES. 

ing in any article which may be a subject of trade or 
commerce, or so as to restrain or injure trade or commerce 
in relation to any such article, or unduly to prevent ., 
limit, or lessen the manufacture or production of any 
article or unreasonably to enhance the price thereof, or 
unduly to prevent or lessen competition in the produc- 
tion, manufacture, purchase, barter, sale, transportation, 
jurisdiction storage, or supply of any article, such patent shall be 
o f exchequer liable to be revoked. And, if a board reports that a pat- 
ent has been so made use of, the minister of justice may 
exhibit an information in the exchequer court of Canada 
praying for a judgment revoking such patent, and the 
court shall thereupon have jurisdiction to hear and de- 
cide the matter and to give judgment revoking the pat- 
ent or otherwise as the evidence before the court may 

stricSng man" 23. Any person reported by a board to have been guilty 
or a competit?on! °f unduly limiting the facilities for transporting, pro- 
ducing, manufacturing, supplying, storing, or dealing in 
any article which may be a subject of trade or commerce; 
or of restraining or injuring trade or commerce in rela- 
tion to any such article; or of unduly preventing, limit- 
ing, or lessening the manufacture or production of any 
such article; or of unreasonably enhancing the price 
thereof; or of unduly preventing or lessening competi- 
tion in the production, manufacture, purchase, barter, 
sale, transportation, storage, or supply of any such ar- 
ticle, and who thereafter continues so to offend, is guilty 
Penalty. Q £ an i n( ^i c table offense and shall be liable to a penalty 
not exceeding $1,000 and costs for each day after the ex- 
piration of 10 days, or such further extension of time as 
in the opinion of the board may be necessary, from the 
date of the publication of the report of the board in the 
Canada Gazette during which such person so continues to 
offend. 

SITTINGS OF BOARD. 

board. mgs ° 24. The sittings of the board shall be held at such 
times and places as are fixed by the chairman, after con- 
sultation with the other members of the board, and the 
parties shall be notified by the chairman as to the times 
and places at which sittings are to be held ; provided that, 
N so far as practicable, the board shall sit in the locality 
within which the subject matter of the proceedings be- 
fore it arose, 
proceedings. 25> The proceedings of the board s hall be conducted in 

public, but the board may order that any portion of the 
proceedings shall be conducted in private. 
Decisions. ^Q m rpj^ (j ec i s j on f anv two of the members present at 

a sitting of the board shall be the decision of the board. 
Quorum. ^j m The presence of the chairman and at least one 

other member of the board shall be necessary to constitute 
a sitting of the board. 



TRUSTS IN FOREIGN COUNTRIES. 39 

28. Ill case of the absence of any one member from a me ^|° ce ° * 
meeting* of the board the other two members shall not 
proceed, unless it is shown that the absent member has 

been notified of the meeting in ample time to admit of 
his attendance. 

29. Any party to an investigation may appear before f parties rance 
the board in person or may be represented by any other 

person or persons, or, with the consent of the board, may 
be represented by counsel. 

30. Whenever in the opinion of the minister the public se i Wh appointeS 
interest so requires, the minister may apply to the min- by minister. 
ister of justice to instruct counsel to conduct the investi- 
gation before a board, and upon such application the 
minister of justice may instruct counsel accordingly. 

The fees and expenses allowed to such counsel by the 
minister of justice shall be paid out of such appropria- 
tions as are made by Parliament to provide for the cost 
of administering this act. 

31. If, in any proceedings before the board, any person board. ten ^ t ° f 
willfully insults any member of the board, or willfully 
interrupts the proceedings, or without good cause refuses 

to give evidence, or is guilty in any other manner of any 
willful contempt in the face of the board, any officer of 
the board, or any constable may take the person offending 
into custody and remove him from the precincts of the 
board, to be detained in custody until the conclusion of 
that day's sitting of the board, and the person so offend- 
ing shall be liable, upon summary conviction, to a penalty penalty, 
not exceeding $100. 

WITNESSES AND EVIDENCE. 

32. For the purposes of an investigation the board shall witnesses 
have all powers which are vested in any court of record and evidence * 
in civil cases for the following purposes, namely: The 
summoning of witnesses before it. and enforcing their 
attendance from any part of Canada, of administering 

oaths, and of requiring witnesses to give evidence on oath 
or on solemn affirmation (if they are persons entitled to 
affirm in civil matters), and to produce such books, pa- 
pers, or other documents or things as the board deems 
requisite to the full investigation of the matters into 
which it is inquiring. 

(2) Any member of the board may administer an oath. 0ath 

(3) Summonses to witnesses and all other orders, proc- signature of 
ess, and proceedings shall be signed by the chairman. chairman. 

33. All books, papers, and other documents or things inspection of 
produced before the board, whether voluntarily or in pur- 
suance of summons, may be inspected by the board, and 

also by such parties as the board allows. 

34. Any partv to the proceedings shall be competent .Parties as 
and may be compelled to give evidence as a witness. 

35. Every person who is summoned and duly attends Expenses of 
as a witness shall be entitled to an allowance for attenoj- 



40 



TRUSTS IN FOREIGN COUNTRIES. 



ance and traveling expenses according to the scale in force 
with respect to witnesses in civil suits in the superior 
courts of the Province in which the inquiry is being con- 
ducted. 
witness 1 to at- ^* -^ an y P ers0n wno nas been duly served with a sum- 
tend or to pro- mons and to whom at the time of service payment or 
ments. d ° c u " tender has been made of his reasonable traveling expenses 
according to the aforesaid scale, fails to attend or to pro- 
duce any book, paper, or other document or thing as re- 
quired by his summons, he shall, unless he shows that 
there was good and sufficient cause for such failure, be 
Penalty. guilty of an offense and liable upon summary conviction 

to a penalty not exceeding $100. 
Experts. 37. The board may, with the consent of the minister, 

employ competent experts to examine books or official 
reports, and to advise it upon an}^ technical or other mat- 
ter material to the investigation, but the information ob- 
tained therefrom shall not, except in so far as the board 
deems it expedient, be made public, and such parts of 
the books, papers, or other documents as in the opinion 
of the board are not material to the investigation may 
be sealed up. 

REMUNERATION AND EXPENSES OF BOARD. 



Traveling ex- 
penses. 



Reniunera- gg < The members of a board shall be remunerated for 

tion of board. . , . . „ ,, 

their services as follows: 

(a) To the two members first appointed an allowance 
of $5 each per day for a time not exceeding three days, 
during which they may be actually engaged in selecting 
the third member of the board. 

(b) To each member an allowance at the rate of $20 
for each day's, sitting of the board. 

39. Each member of the board shall be entitled to his 
actual and necessary traveling expenses and an allowance 
of $10 per day for each clay that he is engaged in travel- 
ing from or to his place of residence for the purpose of 
attending or after having attended a meeting of the 
board, 
of A gr ttuTty 40. No member of the board shall accept, in addition to 
prohibited. his traveling expenses and allowances as a member of the 
board, any perquisite, gift, fee, or gratuity of any kind 
from any person in any way interested in any matter or 
thing that is being investigated by the board. The ac- 
ceptance of any such perquisite, gift, fee, or gratuity by 
any member of the board shall be an offense, and shall 
render such member liable upon summary conviction to a 
Penalty. fine not exceeding $1,000, and he shall thereafter be dis- 
qualified to act as a member of any board, 
vouchers for 41 . All expenses of the board, including expenses for 
transportation incurred by the members thereof or by 
persons under its order in making investigations under 
this act, salaries of employees and agents, and fees and 
traveling expenses of witnesses, shall be allowed and 



expenses. 



TRUSTS IN FOREIGN COUNTRIES. 41 

paid upon the presentation of itemized vouchers therefor, 

approved and certified by the chairman of the board, 

which vouchers shall be forwarded by the chairman to 

the registrar. The chairman shall also forward to the Detailed 

registrar a certified and detailed statement of the sit- sittings 11 

tings' of the board and of the members present at each 

of such sittings. 

MISCELLANEOUS. 

42. Xo proceedings under this act shall be deemed in- re JSarfties! ' r 
valid by reason of any defect of form or any technical 
irregularity. 

43. Evidence of a report of a board may be given in r eiK)rt dence ° f 
any court by the production of a copy of the Canada 

Gazette purporting to contain a copy of such report, or 
by the production of a copy of the report purporting to 
be certified by the registrar to be a true copy. 

44. The minister shall determine the allowance or determined by 
amounts to be paid to all persons, other than the mem- mmister - 
bers of a board employed by the Government, or any 

board, including the secretaries, clerks, experts, stenog- 
raphers, or other persons performing any services under 
the provisions of this act. v ' 

45. The governor in council may make such regulations, by governor in 
not inconsistent with this act, as to him seem necessary counciL 

for carrying out the provisions of this act and for the 
efficient administration thereof. 

(2) Such regulations shall be published in the Canada Publication - 
Gazette, and upon being so published tlu^ shall have the 

same force as if thej^ formed part of this act. 

(3) The regulations shall be laid before both Houses before b ParSa- 
of Parliament within 15 days after such publication if ment - 
Parliament is then sitting, and if Parliament Is not then 

sitting then within 15 days after the opening of the next 
session thereof. 

46. The minister shall lay before Parliament, within p0 rt n to U Pariia- 
the first 15 days of the then next session, an annual re- ment 

port of the proceedings under this act. 190 _ c 

47. Subsection 1 of section 12 of the customs tariff, amended. ' 
1907, is repealed. 

48. This act shall not be construed to repeal, amend, 
or in any way affect the trade-unions act, chapter 125 
of the Revised Statutes, 1906. 

Schedule. 
' [Form 1.] 

APPLICATION FOR ORDER DIRECTING AN INVESTIGATION. 

[The combines investigation act, sec. 5.] 

Dated at , this day of , 19—. 

In the matter of an alleged combine (here state shortly the 
nature of the combine). 

To the honorable (here insert the name of the judge), a judge 
(or chief justice as the case may be) of the (here insert the title 
of the court). 



R. s., c. 125. 



42 TRUSTS IN FOREIGN" COUNTRIES. 

The undersigned are of opinion that a combine exists (here 
state shortly the nature of the alleged combine) and that prices 
have been enhanced (or competition has been restricted by such 
combine, as the case may be) to the detriment of consumers (or 
producers, as the case may be). 

The undersigned therefore apply for an order under " the com- 
bines investigation act " directing an investigation into such 
alleged combine. 

(Here state — (a) the nature of the alleged combine and the 
persons believed to be concerned therein; and, (&) the manner in 
which the alleged combine affects prices or restricts competition, 
and the extent to which the alleged combine is believed to operate 
to the detriment of consumers or producers, as the case may be.) 

STATEMENT ACCOMPANYING APPLICATION FOR ORDER. 

Dated at this day of , 19—. 

The undersigned hereby authorize of ( give name and place 

of 'residence) to act as our representative for the purpose of 
" the combines investigation act," and to receive communications 
and conduct negotiations on our behalf. 

The names and addresses of the persons applying for the afore - 
said order are as follows : 



Names. 



statutory declaration accompanying application for order. 1 

Canada : 

Province of , to wit: 

I, , of the of in the of do 

solemnly declare : 

1. That the alleged combine operates to my detriment as a con- 
sumer (or producer, as the case may be). 

2. That to the best of my knowledge and belief the combine 
alleged in the foregoing statement exists, and that such combine is 
injurious to trade (or has operated to the detriment of consum- 
ers or producers, as the case may be) in the manner and to the 
extent described. 

3. That it is in the public interest that an investigation should 
be had into such combine. 

And I make this solemn declaration conscientiously believing 
it to be true, and knowing that it is of the same force and effect 
as if made under oath, and by virtue of the Canada evidence act. 

Declared before me at , in the county of , this 

day of , 19— 

[Form 2.] 

ORDER DIRECTING INVESTIGATION. 

[The combines investigation act, sec. 7.] 

In the matter of the application of (here insert the names of 

applicants), dated the day of , 19— , for an order 

directing an investigation under " the combines investigation act " 
into an alleged combine (here state shortly the nature of the 
combine). 

: A declaration as above must be made by each applicant. 



TKUSTS IN FOREIGN COUNTRIES. 43 

I, the honorable , a judge (or chief justice, as the case may 

be) of (here insert the name of court), after having read the 

application of (names of applicants), dated the day of , 

19__, the statement and statutory declarations accompanying the 
same, and the evidence produced by the said applicants, am 
satisfied that there is reasonable ground for believing that a 
combine exists (here describe nature of combine), which is in- 
jurious to trade (or which has operated to the detriment of con- 
sumers or producers, as the case may be), and that it is in the 
public interest that an investigation should be held, under the 
provisions of the said act, into the following matters, that is to 
say : (Here set out the matters to be investigated.) 

The names of the persons alleged to be concerned in the alleged 
combine are (here insert names and addresses), and I am of 
opinion that the minister of labor should communicate with (here 
insert the name or names with, in each case, the address), in order 
to obtain the recommendation for the appointment of a person 
as a member of the board of investigation on behalf of those con- 
cerned in the said alleged combine. 

Dated at , this day of , 19— 



NEW ZEALAND. 

ACTS FOR THE REPRESSION OF MONOPOLIES IN TRADE 
OR COMMERCE. 

[New Zealand Statutes, 1, Geo. V, 1910, No. 32.] 

Title. AN ACT For the repression of monopolies in trade or commerce. 

Be it enacted by the General Assembly of New Zealand 
in Parliament assembled, and by the authority of the 
same, as follows: 
Short title 1. This act may be cited as the " commercial trusts act, 

and commence- 191( y, Rnd shaU CQme into operation on the lgt day f 

January, 1911. 
inter preta- 2. (1) In this act, unless the contrary intention ap- 

tion ' pears, " commercial trust " means any association or com- 

bination (whether incorporated or not) of any number 
of persons, established either before or after the com- 
mencement of this act, and either in New Zealand or 
elsewhere, and (a) having as its object, or as one of its 
objects, that of (1) controlling, determining, or influenc- 
ing the supply or demand or price of any goods in New 
Zealand or any part thereof or elsewhere, or that of (2) 
creating or maintaining in New Zealand or any part 
thereof or elsewhere a monopoly, whether complete or 
partial, in the supply or demand of any goods; or (b) 
acting in New Zealand or elsewhere with am^ such object 
as aforesaid ; and includes any firm or incorporated com- 
pany having any such object, or acting as aforesaid. 

''Association " includes the union of any number of 
persons by or under any agreement or trust, whether 
temporary or permanent, and whether legally valid or 
not, and whether including any scheme of organization or 
common management or control or not. 

"Member of a commercial trust" means any of the 
constituent persons of that trust, or any agent of that 
trust, and, where any such constituent person or agent is 
a corporation, firm, or association, includes every mem- 
ber or agent of that corporation, firm, or association. 

" Person " includes a corporation, and as used in the 
foregoing definitions of " commercial trust," " associa- 
tion," and " member of a commercial trust " includes also 
a firm of partners or any other association or combina- 
tion of persons. 
Application (2) Nothing in this act shall apply to any goods other 

of act. thsin those specified in the schedule hereto, 

illegal con- 3. Every person commits an offense who, either as 

sfderatfoif c °o n f principal or agent, in respect of dealings in any goods, 

exclusive deal- gives, offers, or agrees to give to any other person any re- 

44 



TRUSTS IN FOREIGN COUNTRIES. 45 

bate, refund, discount, concession, allowance, reward, or 
other valuable consideration for the reason or upon the 
express or implied condition that the latter person — ■ 

(a) Deals or has dealt or will deal, or intends or 
undertakes or has undertaken or will undertake to deal, 
exclusively or principally, or to such an extent as amounts 
to exclusive or principal dealing, with any person or class 
of persons, either in relation to any particular goods or 
generally; or 

(b) Does not deal or has not dealt or will not deal, 
or intends or undertakes or has undertaken or will under- 
take not to deal, with any person or class of persons, 
either in relation to any particular goods or generally ; or 

(<?) Restricts or has restricted or will restrict, or 
intends or undertakes or has undertaken or will under- 
take to restrict, liis dealing with any person or class of 
persons, either in relation to any particular goods or 
generally; or 

(d) Is or becomes or has been, or has undertaken or 
will undertake to become, a member of a commercial 
trust ; or 

(e) Acts or has acted or will act, or intends or under- 
takes or has undertaken or will undertake to act, in 
obedience to or in conformity with the determinations, 
directions, suggestions, or requests of any commercial 
trust with respect to the sale, purchase, or supply of any 
goods. 

4. Every person commits an offense who, either as f U sais S to deal' 
principal or agent, refuses, either absolutely or except 

upon disadvantageous or relatively disadvantageous con- 
ditions, to sell or supply to any other person, or to pur- 
chase from any other person, any goods for the reason 
that the latter person — 

(a) Deals or has dealt or will deal, or intends to deal, 
or has not undertaken or will not undertake not to deal, 
with any person or class of persons, either in relation to 
any particular goods or generally ; or 

(b) Is not or has not been, or will not become or under- 
take to become or has not undertaken to become, a mem- 
ber of a commercial trust ; or 

(c) Does not act or has not acted or will not act, or 
does not intend to act, or has not undertaken or will not 
undertake to act, in obedience to or in conformity with 
the determinations, directions, suggestions, or requests of 
any commercial trust with respect to the sale, purchase, 
or supply of any goods. 

5. Any person who conspires with any other person to noponS 1 m °' 
monopolize wholly or partially the demand or supply in 

Xew Zealand or any part thereof of any goods ; or to con- 
trol wholly or partially the demand or supply or price in 
Xew Zealand or any part thereof of any goods, is guilty 
of an offense if such monopoly or control is of such a 
nature as to be contrary to the public interest. 



46 TRUSTS IN FOREIGN COUNTRIES. 



prices 1 fixed by ^ (-0 Every person commits an offense who, either as 
a commercial principal or agent, sells or supplies, or offers for sale or 
supply, any goods at a price which is unreasonably high, 
if that price has been in any manner directly or indirectly 
determined, controlled, or influenced by any commercial 
trust of which that person or his principal (if any) is or 
has been a member. 

(2) Every person commits an offense who, in obedience 
to or in consequence of or in conformity with any deter- 
mination, direction, suggestion, or request of any com- 
mercial trust, % whether he is a member of that trust or not, 
sells or supplies, or offers for sale or supply, any goods, 
whether as principal or agent, at a price which is unrea- 
sonably high. 
commercial ^ ' (-0 -^ an y commercial trust, whether as principal 
trust. or agent, sells or supplies, or offers for sale or supply, 

any goods at a price which is unreasonably high, every 
person who is then a member of that trust shall be deemed 
to have committed an offense against this act. 

(2) If in any such case the commercial trust is a cor- 
poration, it shall itself be guilty of an offense against 
this act; but the liability of the trust shall not exclude 
or affect the liability of its members under the last pre- 
ceding subsection, 
a 7i hen t o Pli b e e ^' tne P ur P° ses °f this act the price of any goods 

deemed unrea- shall be deemed to be unreasonably high if it produces 
sonabiy high. Qr ^ g ca } cu i a ted to produce more than a fair and reason- 
able rate of commercial profit to the person selling or 
supplying, or offering to sell or supply, those goods, or 
to his principal, or to any commercial trust of which that 
person or his principal is a member, or to any member of 
any such commercial trust. 
Aiding and 9. Every person who aids, abets, counsels, or procures, 
fenses against or is in any way knowingly concerned in the commission 
this act. ^ an ff ense a g ams t this act, or the doing of any act 

outside New Zealand which would if done in New Zea- 
land be an offense against this act, shall be deemed to 
have committed that offense. 
Penalty. 10. (1) Every person who commits an offense against 

this act shall be liable to a penalty of £500. 

(2) If two or more persons are responsible for the same 
offense against this act, each of those persons shall be 
severally liable to a penalty of £500, and the liability of 
each of them shall be independent of the liability of the 
others. 
Penalties re- 11. Every such penalty shall constitute a debt due by 
action } iii the the offender to His Majesty the King, and shall be re- 
supreme court, coverable, together with costs of suit, by a civil action in 
the supreme court, instituted by the attorney general for 
and in the name of His Majesty. 
court 1 ma en ? e ^" ^ n an - v Sllcn action the supreme court may remit 
duce penalty, such part of the aforesaid penalty of £500 as it thinks 
fit, and may give judgment for the residue of the penalty 
only. 



>r 



TRUSTS IN FOREIGN COUNTRIES. 



47 



tion 



of 

and 

ac- 



13. In any such action the supreme court may, in addi- ag ^£^ *£*£[ 
tion to the said penalty, grant an injunction against the Hon or contin 
continuance or repetition of the offense; but no such in- fences. 
junction shall be granted by way of interlocutory pro- 
ceedings before final judgment in the action. 

1±. (1) In any such action claims may be joined f or J$£* er 
the recovery of penalties in respect of several offenses, causes ' of 
whether of the same or different kinds. t] 

(2) In any such action several persons may be joined 
as defendants, whether in respect of the same or of dif- 
ferent offenses, and whether those offenses are committed 
by the same or by different parties; and in any such case 
separate judgments ma} 7 be given in respect of each de- 
fendant so joined. 

(3) In the case of any such joinder of causes of action 
or of parties the supreme court may give such directions 
as it thinks fit for the separate trial of any cause of 
action against any defendant. 

15. (1) In any action for the recovery of a penalty 
or for an injunction under this act the supreme court 
may, in proof of any fact in issue, admit and accept as 
sufficient such evidence as it thinks fit, whether such evi- 
dence is legally admissible in other proceedings or not. 

(2) In any action for the recovery of a penalty or for 
an injunction under this act, no person, whether a party 
to the action or not, shall be excused from answering any 
question put to him by interrogatory or otherwise, or 
from producing or making discovery of any document, 
on the ground that the answer to the question or the pro- 
duction or discovery of the document would tend to crim- 
inate him in respect of any offense against this act. 



Evidence. 



Schedule. 



Schedule. 



GOODS TO WHICH THIS ACT APPLIES. 

Agricultural implements. 

Coal. 

Meat. 

Fish. 

Flour, oatmeal, and the other products or by-products of the 
milling of wheat or oats. 

Petroleum or other mineral oil (including kerosene, naphtha, 
and the other products or by-products of any such oil). 

Sugar. 

Tobacco (including cigars and cigarettes). 

PATENTS, DESIGNS, AND TRADE-MARKS. 

[1908, No. 140.] 

AN ACT To consolidate certain enactments of the general 
assembly relating to patents for inventions and registration of 
designs and of trade-marks. 

COMPULSORY LICENSES. 



28. If on the petition of any person interested it is P ™VL J ° r 

i j. xl. J.T- i. 1* £. xi i _e ix governor to or- 

proved to the governor that by reason or the default der grant of n- 
of a patentee to grant licenses on reasonable terms (a) sec. 8 !!'.) (Ibld '' 



Short title. 



48 TRUSTS IN FOREIGN COUNTRIES. 

the patent is not being worked in New Zealand; or (b) 
the reasonable requirements of the public with respect 
to the invention can not be supplied; or (c) any per- 
son is prevented from working or using to the best ad- 
vantage an invention of which he is possessed, the 
governor may order the patentee to grant licenses on 
such terms as to the amount of royalties, security for 
payment, or otherwise, as the governor, having regard 
to the nature of the invention and the circumstances* of 
the case, deems just, and any such order may be enforced 
by mandamus. 

(New Zealand Consolidation Statutes, Vol. IV, Ap- 
pendix D, act 14r0, sec. 28.) 

MONOPOLY PREVENTION ACT. 

[1908, No. 122.] 

AN ACT To consolidate certain enactments of the general 
assembly relating to the prevention of certain monopolies. 

Be it enacted by the general assembly of New Zealand 
in (parliament assembled, and by the autlwrity of the 
same, as follows: 

1. (1) The short title of this act is "The monopoly 
prevention act, 1908." 
consolidated 11 * 8 (2) This act is a consolidation of the enactments men- 
tioned in the first schedule hereto, and with respect to 
those enactments the following provisions shall apply : 
Savings. (^ ^yj appointments, regulations, orders in council, 

orders, reports, recommendations, instruments, and gen- 
erally all acts of authority which originated under any 
of the said enactments, and are subsisting or in force on 
the coming into operation of this act, shall enure for the 
purposes of this act as fully and effectually as if they 
had originated under the corresponding provisions of 
this act, and accordingly shall where necessary be deemed 
to have so originated. 

(b) All matters and proceedings commenced under any 
such enactment, and pending or in progress on the com- 
ing into operation of this act, may be continued, com- 
pleted, and enforced under this act. 

(3) This act is divided into parts, as follows : 
Part I. Agricultural implements. (Sees. 2 to 13.) 
Part II. Flour and other products. (Sees. 14 to 24.) 

Pakt I. — Agricultural implements. 

tion t . ei fi905] 2. In this part of this act, if not inconsistent with the 
No. 58, sec. 2.)' cc >ntext, " implements " means the implements, machines, 

and appliances specified in the second schedule hereto; 

wt minister " means the minister of customs, 
to be a com r P d iied! 3. (1) The minister shall cause to be compiled a state- 
( ibid., sec. 3.) m€n t showing in the case of each implement its descrip- 



TK0STS IK FOREIGKS COUNTRIES. 49 

tion, the nature and quality of the materials used in its 
construction, and the price then current. 

(2) Such statement shall be published in the Gazette. 

4. On complaint to the minister by any two or more ^compiaint^f 
manufacturers in New Zealand of any implement that the tition. (ibid., 
price of any implement on importation into New Zealand sec - ° 

has been materially reduced, and that competition on 
unfair lines is being carried on by importers of imple- 
ments from foreign "countries, he shall summon the board 
hereinafter constituted and refer the matter of such com- 
plaint to it for report. 

5. (1) There is hereby constituted a board called " The g t B ff^ t ^; 
agricultural implement inquiry board," consisting of — Ubid., sec. 5,")' 

"The judge of the court of arbitration, who shall be 
chairman: 

The president for the time being of the Farmers' 
Union ; 

The president of the Industrial Association of Canter- 
bury ; 

Some person appointed by the governor on the recom- 
mendation of the trades and labor councils; and 

Some person appointed by the governor on the recom- 
mendation of the agricultural and pastoral associations. 

(2) The members of the board appointed by the gov- 
ernor shall be appointed in the same manner as members 
of the court of arbitration (other than the judge) are 
appointed. 

(3) The board and its members as constituted under 
" The agricultural-implement manufacture, importation, 
and sale act 1905," and subsisting on the coming into 
operation of this act, shall be deemed to be the board and 
its members under this act. 

6. (1) The board on being summoned by the minister b0 a?d Uir TrbiV 
shall inquire with as little delay as possible into the mat- sec. e ; 1907' 
ter referred to it in such manner as it thinks fit, and for No> 30 ' sec ' 4> 
the purposes of such inquiry shall have and may exercise 

all the powers that the court of arbitration has in respect 
of industrial disputes. 

(2) The board may exercise its powers and functions 
at any meeting at which the judge of the court of arbitra- 
tion and at least three other members of the board are 
present. 

(3) The board shall report in writing to the minister 
the result of its inquiry, and shall state whether or not 
in its opinion the price of any implement imported into 
New Zealand has been materially reduced below that 
specified in the statement mentioned in section 3 hereof, 
and may recommend that relief be granted in the manner 
hereinafter appearing. 

7. (1) If at any time the manufacturers of imple- . Duty d n l a $ t)e 
ments in New Zealand agree to reduce the price of the Zealand man J 
whole of the implements mentioned in the second £ a u^e era prices" 
schedule hereto, or not less than a moiety thereof, to at 'isop. No. 58^ 
least 20 per cent below that specified in the statement se °" 

67838—12 4 



50 • TRUSTS IN FOREIGN COUNTRIES. 






mentioned in section 3 hereof, and notify the minister 
of such agreement, he shall summon the board and refer 
the matter to it for report. 

(2) The board shall in like manner make inquiry into 
the matter, and report in writing to the minister whether 
or not in its opinion it is advisable for the protection of 
the industry in New Zealand that relief be granted as 
Power to h ere mai ter mentioned, 
grant bonus. 8. (1) In any case where the board recommends that 
fiec 90 !.) N °' 58 ' relief be granted it shall be lawful for the minister to 
grant to the manufacturers of implements in New Zea- 
land such bonus, not exceeding 33 per cent, as he deems 
necessary to enable manufacturers to compete with im- 
porters of such implements. 

(2) The right to such bonus shall be subject to such 
terms and conditions as the governor in council thinks 
fit to impose, 
manufactured 9. For the purposes of this act implements manufac- 
in^united King- tured in the United Kingdom shall be deemed to be manu- 
sec. 9 ; 1907', factured in New Zealand, and the importers of such im- 
No. 30, sec. 3.) pi emen t s sfta ll be deemed to be manufacturers thereof in 

New Zealand. 

ref^ncTduty on 10. (1) Whenever it is proved to the satisfaction of 

riai* in (?905 ^ ne collector that duty-paid materials have been used in 

No. 58, sec. io.) the construction of any implement, he shall refund to 

the manufacturer of such implement the amount of duty 

paid on the materials so used. 

(2) For the purposes of this section " materials " in- 
cludes such parts of implements as can not advantage- 
ously be manufactured in New Zealand. 
board P °to be H« Every report of the board shall be laid before 
Efnamemnt Parliament within 10 days after its presentation to the 
(1907, No. 3o', minister of customs if Parliament is then sitting, and if 
sec. 5.) no ^ t k en within io dayg a fter the commencement of the 

next ensuing session. 
rated* In (°i9§5; 12. (1) This part of this act shall be deemed to be Hi- 
ll'- re' uia^ corporated with " the customs law act, 1908." 
tions, fbid.?sec" (2) The governor may from time to time, by order in 
12,) council gazetted, make regulations necessary for the 

carrying out of this part of this act. 
thS ur par t n of 13. This part of this act shall continue in operation till 

N§.*2i, ( se? 2; the 31st da V of Decern' 
1967, No. ' 30! deemed to be repealed. 

sec. 2.) 



act (1906, the 31st day of December, 1908, on which day it shall be 

JNO. *-J_, SGC. *- , 



Part II. — Flour and other products. 

tiJn te Ti907" 14 - In tnis P art of tnis act " tne court " m eans the 
No. 34, sec. 2.)' court of arbitration under "The industrial concilliation 

and arbitration act. 1908." 
exfmptef teom 15. Notwithstanding anything in "The customs duties 
customs duty. ac t 5 1908," it shall be lawful for the governor, at any 
.,sec. .) ^.^^ an ^ irom time to time, on the recommendation of 

the court, made in accordance with this part of this act, 



TRUSTS IX FOREIGN COUNTRIES. 51 

to declare, by order in council gazetted, that on and after 
a date to be specified in such order in council flour im- 
ported into New Zealand shall be admitted free of all 
duties of customs, and so long- as any such order in 
council remains in force flour shall be exempt from such 
duties accordingly. 

16. Any such order in council may be revoked by the Order in 
governor at any time as from a day to be specified in the tfng C duty e may 
order in council revoking the same, not being earlier than Q bI ^ e v s ° ,? e A* 
three months from the gazetting of the last-mentioned 

order in council. 

17. The court may from time to time, at the direction court may 
of the governor, make an inquiry as to whether the whole- price 1 " of a flour° 
sale market price of flour in New Zealand is unreasonably ^°J\ Na 34, 
high, and if on such inquiry the court finds that such 

price is, or has at any time since the receipt of such 
direction from the governor been, unreasonably high, the 
court shall recommend the governor to exercise the pow- 
ers conferred on him by section 15 hereof. 

18. For the purposes of such inquiry the price of flour TJn reason- 
shall be deemed to be unreasonably high — flour. pri ( C ibid°, 

(a) If the average price of flour in New Zealand is, sec6) 
relatively to the price of wheat in New Zealand, higher 
than the average price of flour in Australia relatively to 

the average price of Avheat in Australia, unless in the 
opinion of the court the additional price in New Zealand 
is justified by additional cost of production; or 

(b) If the average price of wheat in New Zealand has, 
by reason of any combination among the holders of 
stocks of wheat, or by reason of any complete or partial 
monopoly established by any such holder, been raised 
above the price which would be determined by unre- 
stricted competition. 

19. (1) The provisions of sections 15 to 17 hereof shall 17 s ^ s a 1 f \% 
also apply to wheat in the same manner as to flour. wheat, (ibid., 

(2) For the purpose of any inquiry by the court under sec " 7,) 
the authority of this part of this act the price of wheat 
shall be deemed to be unreasonably high if the average 
wholesale price in New Zealand has, by reason of any 
combination among the holders of stocks, or by reason of 
any complete or partial monopoly established by any such 
holder, been raised above the price which would be deter- 
mined by unrestricted competition. 

20. (1) The provisions of sections 15 to IT hereof shall 17 s t e cs apP f y & 
also apply to potatoes in the same manner as to flour. potatoes. 

(2) For the purpose on any inquiry by the court under (Ibld " sec * 8 ' ) 
the authority of this part of this act the price of potatoes 
shall be deemed to be unreasonably high — 

(a) If the average wholesale price in New Zealand 
exceeds 7 pounds per ton ; or 

(b) If the average wholesale price in New Zealand 
has, by reason of any combination among the holders of 
stocks of potatoes, or by reason of any complete or partial 



52 TRUSTS IN FOREIGN COUNTRIES. 

monopoly established by any such holder, been raised 
above the price which would be determined by unre- 
stricted competition, 
ag? ° P Sce aV de- 21 - ( 1 ) The average price in New Zealand of any of 
termined. the aforesaid articles shall be determined by the court 
(ibid., sec. 9.) ^ Qr ^ p Ur p 0Ses f ^g p ar ^ f ^jg ac ^ j^ reference 

to the ordinary market price for the time being in Inver-- 
cargill, Dunedin, Oamaru, Timaru, Christehurch, Well- 
ington, and Auckland.- 

(2) The average price in Australia of any of the afore- 
said articles shall be likewise determined by reference to 
the ordinary market price for the time being in Adelaide, 
Sydney, and Melbourne. 
have°powers of ^2. ( 1 ) In making any inquiry under the authority 
commission of this part of this act, the court shall be deemed to be 

(Ibid., sec. 10.) • • ■,-, • a ±1 /» • , 

a commission within the commissions ot inquiry act, 
1908," and shall have all the powers conferred upon com- 
missioners by that act, and shall be subject to all the 
provisions of that act accordingly. 

(2) In making any such inquiry the court may receive 
and act on any evidence which it thinks fit, whether the 
same is legally admissible in a court of law or not. 

tiv^s P of eS a n d- 23, (*) ^ or tne P ur P oses of this part of this act there 
cultural and" shall be added to the court one additional member thereof, 
ties t0 to be Cie a to be appointed by the governor from time to time in the 
court 61 " ^ 9 *J^ e case of any inquiry under this part of this act, on the 
No.34,sec. n. /recommendation of a majority of the societies incor- 
porated under " the agricultural and pastoral societies 
act, 1908." 

(2) The member so appointed shall be deemed to be a 
member of the court for the purpose of the inquiry in 
respect of which he was so appointed, but for no other 
purpose whatsoever. 

(3) The recommendation of the said societies shall be 
made in such manner as is prescribed by regulations made 
by the governor in council. 

(4) If the said societies fail to make any recommenda- 
tion in accordance with such regulations, the governor 
majr appoint as such additional member of the court any 
person whom he thinks fit. 

(5) The additional member (if any) appointed under 
" the flour and other products monopoly prevention act, 
1907," and in office on the coming into operation of this 
act, shall be deemed to be the additional member under 
this act. 

(ibid U ,sec. u i2!)' 24. (1) In the case of any inquiry under this part 
of this act the court may exercise its powers and func- 
tions at any sitting thereof at which there are present 
three members, including the judge of the court. 

(2) In the case of any division of opinion, if the mem- 
bers of the court who are present are equally divided in 
opinion, the decision of the judge shall be deemed to be 
the decision of the court. 



TRUSTS IN FOREIGN COUNTRIES. 



53 



First Schedule, 
enactments consolidated. 

1905, No. 58. The agricultural-implement manufacture, importa- 
tion, and sale act, 1905. 

1906, No. 21. The agricultural-implement manufacture, importa- 
tion, and sale act. extension act, 1906. 

1907, No. 30. The agricultural-implement manufacture, importa- 
tion, and sale act, 1907. 

1907, No. 34. The flour and other products monopoly prevention 
act, 1907. 



Second Schedule. 

implements to which part i of this act relates. 

Plows of all kinds over 1^ hundredweight. 
Tine harrows. 
Disk harrows. 

Prills, combined grain, seed, and manure, 10 coulters and over. 
Drills, combined grain, seed, and manure, 10 coulters. 
Drills, grain. 

Rollers, land and Cambridge, over 7 hundredweight. 
Cultivators and grubbers, over 2 hundredweight. 
Chaff cutters, 9-inch mouth and over. 
Self -bagging chaff cutters. 
Seed cleaners. 

(New Zealand Consolidated Statutes, Appendix D, Vol. IV, 
pp. 2S3 to 287.) 

[1908, No. 236.] 

AN ACT To amend the monopoly prevention act, 1908. 

[Oct. 10, 1908.] 



Sees. 2, 7, 
1905, No. 58, 
schedule. 



Title. 



Be it enacted by the General Assembly of New Zealand 
in Parliament assembled, and by the authority of the 
same, as folloics: 

1. This act may be cited as the monopoly prevention Short title. 
amendment act. 1908. 

2. (1) Part I of the monopoly prevention act, 1908, operation of 
shall continue in operation until the 31st day of Decern- ac ex en ' 
ber, 1910, on which day it shall be deemed to be repealed. 

(2) Section 13 of the monopoly prevention act, 1908, Repeal, 
is hereby repealed. 

(New"ZeaIand Statutes, 1908, No. 236, p. 110.) 

[1907, No. 34.] 

AN ACT To prevent the establishment of monopolies in the sale Title. 
of flour and other products. 

[Nov. 19, 1907.] 

Be it enacted by the General Assembly of New Zealand 
in Parliament assembled, and by the authority of the 
same, as follows: 

1. This act may be cited as the " flour and other prod- Short title, 
ucts monopoly prevention act, 1907." 



54 



TRUSTS IN FOREIGN COUNTRIES. 



Interpreta 
tion. 



Flour may 
b e exempted 
from customs 
duty. 



Order in 
council remit- 
ting duty may 
be revoked. 



Court may 
inguire as to 
price of flour. 



Unreason- 
able price of 
flour. 



Act to apply 
also to wheat. 



Act to apply 
also to pota- 
toes. 



2. In this act " the court " means the court of arbitra- 
tion under the industrial conciliation and arbitration act, 
1905. 

3. Notwithstanding anything contained in the tariff 
act, 1907, it shall be lawful for the governor, at any time 
and from time to time, on the recommendation of the 
court made in accordance with this act, to declare, by 
order in council gazetted, that on and after a date to be 
specified in such order in council flour imported into New 
Zealand shall be admitted free of all duties of customs, 
and so long as any such order in council remains in force 
flour shall be exempt from such duties accordingly. 

4. Any such order in council may be revoked by the 
governor at any time as from a day to be specified in the 
order in council revoking the same, not being earlier 
than three months from the gazetting of the last-men- 
tioned order in council. 

5. The court may from time to time, at the direction of 
the governor, make an inquiry as to whether the whole- 
sale market price of flour in New Zealand is unreasonably 
high; and if on such inquiry the said court finds that such 
price is, or has at any time since the receipt of such direc- 
tion from the governor been, unreasonably high, the said 
court shall recommend the governor to exercise the powers 
conferred upon him by section 3 of this act. 

6. For the purposes of such inquiry the price of flour 
shall be deemed to be unreasonably high — 

(a) If the average price of flour in New Zealand is, 
relatively to the price of wheat in New Zealand, higher 
than the average price of flour in Australia relative!}^ to 
the average price of wheat in Australia, unless in the 
opinion of the court the additional price in New Zealand 
is justified by additional cost of production ; or 

(b) If the average price of wheat in New Zealand has, 
by reason of any combination among the holders of stocks 
of wheat, or by reason of any complete or partial monop- 
oly established by any such holder, been raised above the 
price which would be determined by unrestricted compe- 
tition. 

7. (1) The provisions of sections 3, 4, and 5 of this act 
shall also apply to wheat in the same maimer as to flour. 

(2) For the purpose of any inquiry by the court under 
the authority of this act, the price of wheat shall be 
deemed to be unreasonably high if the average whole- 
sale price in New Zealand has, by reason of any combina- 
tion among the holders of stocks or by reason of any com- 
plete or partial monopoly established by any such holder, 
been raised above the price which would be determined 
by unrestricted competition. 

8. (1) The provisions of sections 3, 4, and 5 of this act 
shall also apply to potatoes in the same manner as to 
flour. 



TRUSTS IN FOREIGN COUNTRIES. 55 

(2) For the purpose of any inquiry by the court under 
the authority of this act, the price of potatoes shall be 
deemed to be unreasonably high — 

(a) If the average wholesale price in New Zealand 
exceeds £7 per ton; or 

(b) If the average wholesale price in New Zealand has, 
by reason of any combination among the holders of stocks 
of potatoes or by reason of any complete or partial mo- 
nopoly established by any such holder, been raised above 
the price which would be determined by unrestricted 
competition. 

9. The average price in New Zealand of any of the p How average 
aforesaid articles shall be determined by the said court mined. 

for the purposes of this act by reference to the ordinary 
market price for the time being in Invercargill, Dune- 
din, Timaru, Oamaru, Christchurch, Wellington, and 
Auckland. The average price in Australia of any of 
the aforesaid articles shall be likewise determined by ref- 
erence to the ordinary market price for the time being 
in Adelaide, Sydney, and Melbourne. 

10. (1) In making any inquiry under the authority of hav/p^wers^? 
this act, the court shall be deemed to be a commission commission, 
within the commissioners act, 1903, and shall have all 

the powers conferred upon commissioners by that act, 
and shall be subject to all the provisions of that act 
accordingly. 

(2) In making any such inquiry the said court may • 

receive and act on any evidence which it thinks fit, 
whether the same is legally admissible in a court of law 
or not. 

11. (1) For the purposes of this act there shall be tiv? e o? r a e gr£ut 
added to the court one additional member thereof, to be turai and pas- 
appointed by the governor from time to time in the case to^e a Member 
of any inquiry under this act, on the recommendation of of tne courL 

a majority of the societies incorporated under the agri- 
cultural and pastoral societies act, 1877. 

(2) The member so appointed shall be deemed to be 
a member of the said court for the purpose of the inquiry 
in respect of which he was so appointed, but for no 
other purpose whatsoever. 

(3) The recommendation of the said societies shall 
be made in such manner as is prescribed by regulations 
made by the governor in council. 

(4) If the said societies fail to make any recommenda- 
tion in accordance with such regulations, the governor 
may appoint as such additional member of the said court 
any person whom he thinks fit. 

12. (1) In the case of any inquiry under this act the Q uorum - 
court may exercise its powers and functions at any sitting 
thereof at which there are present three members, includ- 
ing the judge of the said court. 

(2) In the case of any division of opinion, if the mem- 
bers of the said court who are present are equally divided 



56 



TRUSTS IN FOREIGN COUNTRIES. 



in opinion, the decision of the said judge shall be deemed 
to be the decision of the court. 

(New Zealand Statutes, 7 Edw. VII, 1907, pp. 137 to 
139.) 



Title. 



Short title. 



Act of 1906 
extended. 



Sec. 9 of act 
of 1905 amend- 
ed. 



Quorum o f 
agricultural 
implement In- 
quiry board. 



Report of 

board tobepre- 
sented to Par- 
liament. 



[1907, No. 30.] 

AN ACT To amend the agricultural-implement manufacture, im- 
portation, and sale act, 1905, and to continue the operation 
thereof. 

[Nov. 13, 1907.] 

Be it enacted by the General Assembly of New Zealand 
in Parliament assembled, and by the authority of the 
same, as follows: 

1. This act may be cited as the " agricultural-imple- 
ment manufacture, importation, and sale act, 1907." 

2. Section 2 of the agricultural-implement manufac- 
ture, importation, and sale act extension act, 1906, is 
hereby amended by omitting the word " seven " and sub- 
stituting the word " eight." 

3. Section 9 of the agricultural-implement manufac- 
ture, importation, and sale act/ 1905, is hereby amended 
by omitting the words " of British manufacture," and 
substituting the words " manufactured in the United 
Kingdom." 

4. The board constituted by the last-mentioned act 
may exercise its powers and functions at any meeting at 
which the judge of the court of arbitration and at least 
three other members of the board are present. 

5. The report of the board shall be laid before Parlia- 
ment within ten days after its presentation to the minis- 
ter of customs if Parliament is then sitting, and if not, 
then within ten days after the commencement of the next 
ensuing session. 

(New Zealand Statutes, 7 Edw. VII, 1907, p. 129.) 



Title. 



Short title. 



Contluua 
tion of act. 



[1906, No. 21.] 

AN ACT To revive " the agricultural implement manufacture, im- 
portation, and sale act, 1905." 

[Oct. 23, 1906.] 

Be it enacted by the General Assembly of New Zealand 
in Parliament assembled, and by tlie authority of the 
same, as follows: 

1. The short title of this act is " The agricultural im- 
plement manufacture, importation, and sale act extension 
act, 1906." 

2. (1) The agricultural implement manufacture, im- 
portation, and sale act, 1905, shall continue in operation 
and be deemed to have continued in operation as if sec- 



TRUSTS IN FOREIGN COUNTRIES. 57 

tion 13 thereof had not been passed until the 31st day of 
December, 1907. 

(2) The said section 13 is hereby repealed. Repeal. 

(New Zealand Statutes, 1906, No. 21, p. 71.) 



[1905, No. 58.] 

AN ACT To regulate and control the manufacture and sale of cer- Title, 
tain agricultural implements within New Zealand and the im- 
portation of the same implements from foreign countries. 

[Oct. 31, 1905.] 

Be it enacted by the General Assembly of New Zealand 
in Parliament assembled, and by the authority of the 
same, as follows: 

1. The short title of this act is " The agricultural im- Short tltIe - 
plement manufacture, importation, and sale act, 1905." 

2. In this act, if not inconsistent with the context, ti0 ^ nterpreta " 
" commissioner " means the commissioner of trade and 

customs ; " implements " means the implements, machines, 
and appliances specified in the schedule hereto. 

3. (1) As soon as practicable after the passing of this, standard list 

l 4.-U • ' u n 4. u -i 1 ± j. t0 be compiled. 

act the commissioner shall cause to be compiled a state- 
ment showing in the case of each implement its descrip- 
tion, the nature and quality of the materials used in its 
construction, and the price current on the passing of this 
act. 

(2) Such statement shall be published in the Gazette. 

4. On complaint to the commissioner bv any two or Complaint of 

Pi -t^t rr i in' • t ^ unfair compe- 

more manufacturers in New Zealand of any implement tition. 
that the price of any implement on importation into New 
Zealand has been materially reduced, and that competi- 
tion on unfair lines is being carried on by importers of 
implements from foreign countries, he shall summon the 
board hereinafter constituted and refer the matter of such 
complaint to it for report. 

5 (1) There is hereby constituted a board called " The sti ?° t a e r d d con " 
agricultural implement inquiry board," consisting of — 

The president of the arbitration court, who shall be 
chairman; 

The president for the time being of the Farmers' 
Union ; 

The president of the Industrial Association of Canter- 
bury; 

Some person appointed-by the governor on the recom- 
mendation of the trades and labor councils; and 

Some person appointed by the governor on the recom- 
mendation of the agricultural and pastoral associations. 

(2) The members of the board appointed by the gov- 
ernor shall be appointed in the same manner as members 
of the arbitration court (other than the president) are 
appointed. 



58 TRUSTS IN FOREIGN COUNTRIES. 

boa?d Uiry by ' *>• (1) The board on being summoned by the commis- 
sioner shall inquire with as little delay as possible into 
the matter referred to it in such manner as it thinks fit, 
and for the purposes of such inquiry shall have and 
may exercise all the powers that the arbitration court has 
in respect of industrial disputes. 

(2) The board shall report in writing to the commis- 
sioner the result of its inquiry, and shall state whether 
or not in its opinion the price of any implement imported 
into New Zealand has been materially reduced below that 
specified in the statement mentioned in section 3 hereof, 
and may recommend that relief be granted in the manner 
hereinafter appearing, 
imposed "tfNew 7. (1) If at any time after the passing of this act the 
?acture d rs mai re- manufacturers of implements in New Zealand agree to 
duce prices. reduce the price of the whole of the implements men- 
tioned in the schedule hereto, or not less. than a moiety 
thereof, to at least 20 per cent below that specified in the 
statement mentioned in section 3 hereof, and notify the 
commissioner of such agreement, he shall summon the 
board and refer the matter to it for report. 

(2) The board shall in like manner make inquiry into 
the matter, and report in writing to the commissioner 
whether or not, in its opinion, it is advisable for the pro- 
tection of the industry in New Zealand that relief be 
granted as hereinafter mentioned. 
r^ttTnus to 8- (1) I n any case where the board recommends that 
relief be granted it shall be lawful for the commissioner 
to grant to the manufacturers of implements in New 
Zealand such bonus, not exceeding 33 per cent, as he 
deems necessary to enable manufacturers to compete with 
importers of such implements. 

(2) The right to such bonus shall be subject to such 
terms and conditions as the governor in council thinks fit 
to impose. 
fBHtishman 8 ^' ^ e P ur P oses °^ this act implements of British 

ufacture. " manufacture shall be deemed to be manufactured in New 
Zealand, and the importers of such implements shall be 
deemed to be manufacturers thereof in New Zealand. 
re£nd w duty on 10 * (*) Wh enev8r it is proved to the satisfaction of 
certain mate- the collector that duty-paid materials have been used in 
the construction of any implement, he shall refund to the 
manufacturer of such implement the amount of duty paid 
on the materials so used. 

(2) For the purposes of this section materials include 
such parts of implements as can not advantageously be 
manufactured in New Zealand. 
Acts incor- H. This act shall be deemed to be incorporated with 
" The customs laws consolidation act, 1882," and its 
amendments. 
Regulations. 12. The governor may from time to time, by order in 
council gazetted, make regulations necessary for the car- 
rying out of this act. 






TRUSTS IN FOREIGN COUNTRIES. 59 

13. This act shall continue in operation till the 1st ac f uratIon of 
day of August, 1906. on which day it shall be deemed to 
be repealed. 

Schedule. Schedule. 

IMPLEMENTS TO WHICH THIS ACT RELATES. 

Plows of all kinds over 1£ hundredweight. 

Tine harrows. 

Disk harrows. 

Drills, combined grain, seed, and manure, 10 colters and over. 

Drills, combined grain, seed, and manure, 10 colters. 

Drills, grain. 

Rollers, land and Cambridge, over 7 hundredweight. 

Cultivators and grubbers, over 2 hundredweight. 

Chaff cutters, 9-inch mouth and over. 

Self -bagging chaff cutters. 

Seed cleaners. 

(New Zealand Statutes, 5 Edw. VII, 1905, pp. 601-603.) 



BRITISH EMPIRE. 

List of company acts of the British Empire from 1S62 to 1907, showing title of 

act and year of passage. 



Year of 
passage. 


Title of act. 


Year of 
passage. 


Title of act. 




UNITED KINGDOM. 




Canada— continued. 


1862 


Companies act. 




Quebec. 


1864 


Companies seals act. 






1867 


Companies act. 


1888 


Revised Statutes (arts. 4694 to 4793). 


1870 


Joint stock companies arrangement act. 


1895 


Amendment. 


1877 


Companies act. 
Do. 


1898 


Do. 


1879 


1902 


Do. 


1880 


Do. 


1904 


Do. 


1883 


Companies (colonial registers) act. 


1904 


Extraprovincial corporations. 


1886 


Companies act. 






1888 


Preferential payments in bankruptcy- 
act. 
Do. 




Nova Scotia. 


1897 


1900 


Nova Scotia companies' act. 


1890 


Companies (memorandum of associa- 


1900 


Companies' (winding-up) act. 




tion) act. 


1900 


Chap. 130, Revised Statutes. 


1890 


Companies (winding up) act. 


1902 


Companies' act of 1900 (amendment). 


1890 


Directors' liability act. 


1903 


Do. 


1893 


Companies (winding up) act. 


1904 


Do. 


1898 


Companies act. 


1905 


Do. . 


1900 


Do. 


1906 


Do. 


1907 


Do. 


1900 


Chap. 127, relating to foreign corpora- 


1908 


Do. 




tions. 


1908 


Companies (consolidation) act (Dec. 21, 


1903 


Amendment. 




1908). 


1904 


Do. 




INDIA. 




New Brunswick. 


1882 


Indian companies act. 


1903 


New Brunswick joint stock companies' 


1895 


Indian companies (memorandum of as- 




act. 




sociation) act, amending act of 1882. 


1904 


New Brunswick joint stock companies' 
act (amendment). 
Do. 




DOMINION OF CANADA. 


1906 


- 




1903 


Consolidated Statutes, chap. 86. 




(As distinguished from the Canadian 


1903 


Companies' winding-up act. 




Provinces.) 


1903 


Extraprovincial corporations, licensing 


1902 

1904 


Companies act. 
Do. 


1905 


of. 
Extraprovincial corporations, licensing 




Companies may be incorporated 




of (amendment) . 




either under Dominion laws or those 








of the Provinces, but the insolvency 




Manitoba. 




of companies is a matter within the ex- 








clusive jurisdiction of the Dominion. 


1902 

1904 


Manitoba joint stock companies' act. 
Manitoba joint stock companies' act 




CANADA. 




(amendment). 






1905 


Do. 




Ontario. 


1906 


Manitoba joint stock companies' act 
(amendment) (2). 


1897 


Ontario companies' act. 


1899 


Joint stock companies' winding-up act. 
Chap. 29, laws of 1902. 


1898 


Ontario companies' act (amendment). 


1902 


1899 


Do. 
Do. 
Do. 
Do. 
Ontario mining companies' incorpora- 


1903 


Foreign corporation act. 


1900 

1901 

1902 

1897 




Province of Northwest Territories. 


1901 


Companies' ordinance. 




tion act. 


1903 


Foreign companies' ordinance. 


1897 


An act, chap. 215 of laws of 1897. 


1903 


Companies' winding-up ordinance. 


1897 


Directors' liability act. 


1903 


Trust companies' ordinance. 


1897 


Chaps. 217, 219, 220 of laws of 1897 (3 








acts). 




British Columbia. 


1897 


Joint stock companies' winding-up act. 






1902 


Joint stock companies' winding-up act 


1897 


Companies' act (a consolidation act). 




(amendment). 


1898 


Companies' act (amendment). 


1900 


Act respecting the licensing of extra- 


1899 


Do. 




provincial corporations. 


1900 


Do. 


1901 


Do. 


1901 


Do. 



60 



TRUSTS IN FOREIGN COUNTRIES. 61 

List of company acts of the British Empire from 1862 to 1901, etc. — Continued. 



Year of 
passage. 


Title of act. 


Year of 
passage. 


Title of act. 




Canada— continued. 




COMMONWEALTH OF AUSTRALIA— 

continued. 




British Columbia— Continued. 




Western Australia. 


1902 


Companies' act (amendment) (2). 






1904 


Companies' act (amendment). 


1893 


Companies act (a consolidation act). 


1905 


Do. 


1896 


Companies act amendment act. 


1906 


Do. 


1897 


Do. 


1898 


Mortgage debenture act. 


1898 


Do. 


1903 


Companies' winding-up act. 


1899 


Companies duty act. 


1898 


Companies' act (since repealed). 

COMMONWEALTH OF AUSTRALIA. 
New South Wales. 


1899 

1902 


Companies act amendment act. 
Do. 

New Zealand. 






1903 


Companies act (a consolidation act). 


1899 


Companies' act (a consolidation act). 


1904 


Mining companies act. 


1900 


Companies' act (amendment). 






1906 


Do. 




SOUTH AFRICA. 


1901 


Companies' (death duties' act). 
Victoria. 




Cape of Good Hope. 






1892 


Companies act. 


1890 


Companies act (a consolidation act). 


1895 


Company debenture act. 


1892 


Companies act amendment act. 


1906 


Companies act amendment act. 


1895 


Companies documents act. 






1896 


Companies act amendment act. 




Natal. 


1896 


Companies act. 






1897 


Companies act amendment act (Sep- 
tember). 
Companies act amendment act (De- 


1864 


Joint stock companies limited liability 

law. 
Law No. 18. 


1897 


1865 




cember). 


1866 


Winding up law. 


1900 


Companies act. 


1893 


Joint stock companies amendment law. 


1903 


Do. 


1896 


Law No. 3. 




South Australia. 


1899 


Share pledge act. 


1892 


Companies act (a consolidation act). 




Transvaal. 


1893 


Companies amendment act. 










1874 


Law No. 5, enacted by the Volksraad, 




Queensland. 




resolution dated Oct. 31, 1874. 






1874 


Amendment, Nov. 18, 1874. 


1863 


Companies act. 


1890 


Amendment, May 10, 1890. 


1886 


British companies act. 


1892 


Amendment, Mav 24, 1892. 


1886 


Mining companies act. 


1892 


Amendment by executive council 


1889 


Companies act amendment act. 




Dec. 11, 1892. by authority of 


1890 


Dividend duty act. 




Volksraad. 


1891 


Companies act. 


1894 


Volksraad resolution, June 2, 1894. 


1892 


Companies (winding up) act. 


1894 


Volksraad resolution, May 30, 1894. 


1893 


Companies act. 


1904 


Ordinance No. 30. 


1894 


Reconstructed companies act. 






1895 

1896 


Foreign companies act. 
Do 




Orange River Colony. 




Tasmania. 


1891 


Statute law of Orange Free State, chap. 

100. 
Law No. 2. 


1869 


Companies act. 


1892 


1895 


Companies act (amendment). 


1892 


Law No. 4. 


1896 


Do. 


1904 


Companies amendment ordinance No. 


1898 


Foreign companies act, No. 2 




24. 


1901 


Foreign companies amendment act. 






1902 


Do. 




British South Africa Co. 


1905 


Do. 






1884 


Mining companies act. 


1895 


Ordinance No. 2. 


1895 


Mining companies (foreign) act. 






1896 


Mining companies amendment act. 






1900 


Do. 







THE LAW CONCERNING MONOPOLISTIC COMBINA- 
TIONS IN CONTINENTAL EUROPE. 1 

By Francis Walker. 

The problem of monopolistic combinations in industry is of world- 
wide character, but the law respecting them differs greatly in the most 
important States. These differences arise partly from various his- 
torical circumstances of social and legal development, but they are 
also due to different views as to the significance of such combina- 
tions and the attitude that the State should assume toward them 
with respect to both public and private interests. 

Industrial combinations are by no means purely modern phenom- 
ena, and the jurisprudence of Europe in ancient as well as in modern 
times has addressed itself to the question of their propriety and 
legality. In the early empire, for example, the law made the corner- 
ing and engrossing of grain a criminal offense, and threatened the 
same with penalties varying from a denial of trading privileges to 
banishment and public labor. * A law of Zeno, under the later em- 
pire, forbade under penalty of a heavy fine all combinations whereby 
it was agreed that a commodity should not be sold below a certain 
price. A similar policy was followed in the Middle Ages by the 
emperors of the Holy Roman Empire, and by the kings of France, 
and to their influence can be traced some of the provisions of modern 
European codes. 2 

The course of development in modern States has not only differed 
widely, but in the same State, at different periods, the changing 
views of political and social philosophy have been reflected in the 
law. A remarkable illustration of the effect of new ideas is seen 
in the legislation of the French Revolution, and notably in the law 
which forbade all associations in the form known to the French law 
as " corporations " (i. <?., guilds or associations of persons in the 
same trade) on account of the odious monopolies which they had 
established under the ancien regime. 3 Another illustration of more 
historical importance, and resting on deeper rooted ideas of social 
policy, is found in the ninetenth century movement toward indus- 
trial freedom which has brought about the abolition of laws pro- 
hibiting employers and wage earners from combining with respect 
to labor contracts. In this matter, indeed, the policies of modern 
States, following a strong democratic tendency, have shown more 
consistency than with respect to combinations to control production 
and prices. It is with this last question that we are here concerned. 

1 Reprinted from Political Science Quarterly, vol. xx, No. 1. 

2 MenzeI, Die Kartelle und die Rechtsordnuns:, Leipzig, 1902, pp. 12-16. See also 
De Birague d'Apremont, L'Accaparement et les formes modernes d'ententes entre produc- 
teurs devant le droit penal, Paris, 1903, pp. 37-54. 

8 Cf. infra, p. 27 ; De Birague, op. cit. pp. 54 et seq. 

62 



TRUSTS IN FOREIGN COUNTRIES. 63 

The evolution and present condition of combinations in Europe 
is quite be}^ond the scope of this discussion; it is sufficient to say 
that, taking the continent as a whole, industrial combinations seem 
quite as numerous as in America, and in some countries they are 
highly developed. They are usually called cartels. The European 
cartel corresponds to an American pool, but it is generally more 
highly organized. Consolidated organizations of business — trusts, 
fusions, mergers, etc. — are rarely found. 1 

The conditions of space and material make it necessary to con- 
fine the discussion of the law to the chief industrial countries of 
continental Europe, viz, Germany, Austria, and France, although 
brief references will be made to certain others. For these three 
States it is possible to make a fairly complete statement of the law, 
although no attempt will be made to enter into the minute distinc- 
tions of legal interpretation nor to give an exhaustive digest of the 
cases. One phase of the subject, the regulation of competition in 
bidding on public contracts, will be omitted entirely. 

The law can be most conveniently examined and clearly under- 
stood by taking each country separately, considering, first, the crimi- 
nal law, and, second, the civil law, and examining under each (a) 
legislation, (b) judicial decisions, and (c) comment of jurists. 

I. THE GERMAN EMPIRE. 

The law of the German Empire is of special interest for two 
reasons, first, because the new code represents the latest effort of 
scientific jurisprudence, and, second, because it was established at 
a time when industrial combinations had reached a high stage of 
development in that country and had attracted the attention of 
statesmen and jurists. 

The German criminal code 2 contains no prohibition against car- 
tels nor any law specially concerning them. 3 A good many offenses 
under the criminal law might, of course, be committed by cartels. 
A case of some interest occurred recently under the article of the 
criminal code which prohibits extortion. 4 A powder-manufacturing 
combination refused to supply dealers who did not buy exclusively 
of them. One of their customers purchased supplies from an out- 
sider and was threatened in consequence with a discontinuance of 
supply. The imperial court condemned this as contrary to the law. 5 

The provisions of the civil law in Germany are much more impor- 
tant with respect to cartels than those of the criminal law, but here 
also nothing is to be found preventing their establishment. The civil 
law implicitly recognizes the validity of cartel contracts, because 
it establishes the general principle of freedom of contract without 
making any exception of cartel contracts. 6 Cartels have been at- 
tacked, nevertheless, in the courts both under the industrial code and 
under the civil code. 



1 Cf. Tschierschy, Kartelle und Trust, Gottingen, 1903, pp. 11 et seq. 

2 Strafgesetzbuch fiir das deutsche Reich. 

3 Menzel, op. cit., p. 7 ; Landesberger, in Gutachten liber die rechtlichen Bebandlungen 
der Industrie-Kartelle, Verhandlungen des 26ten Deutschen Juristentages, Berlin, 1903, 
p. 350 ; Hirsch, Die rechtliche Behandlung der Kartelle, Jena, 1903, p. 7. 

* StGB, sec. 243. 

5 Urtiel v. 29 Nov., 1900, Entscheidungen des Rcichsgerichts in Strafsachen, Vol. 
XXXIV, pp. 15 et seq. 

6 Landesberger, in 26ten Juristentag, p. 350 ; Hirsch, op. cit., p. 7 ; Menzel, op. cit., p. 16. 



64 TKUSTS IN FOREIGN COUNTRIES. 

The industrial code ( Gewerbeordnung) establishes the general 
principle of free industry in its first section, which reads : " The 
pursuit of an industry is permitted to everyone in so far as excep- 
tions or limitations are not imposed or permitted in the present law." 
The interpretation of this section goes back to the beginning of the 
activity of the German imperial court. The earlier cases were re- 
garding such restraints on the freedom of industry as are contained 
in contracts to abstain from engaging in a certain business under 
certain conditions of time and space. In a case decided in 1880 the 
court said : " The industrial code does not aim to limit the freedom 
of contract to any greater extent than is required in the interest of 
the public." 1 In 1890 a case came before the imperial court concern- 
ing the relations of a publishers and booksellers' cartel with an 
outsider, against whom certain discriminations had been made on 
account of rate cutting. The cartel was attacked as an infringement 
of the principle of free industry. The court, however, denied this 
and said in part : 

From the principle of industrial liberty it does not follow that there must 
be no interference with the free play of economic forces in the sense that 
persons engaged in an industry should be prohibited from endeavoring in the 
way of associated self-help to regulate the activity of these forces and to 
prevent excesses that are deemed injurious. 2 

The most important decision of all was in the case of the Saxon 
wood-pulp cartel in 1897. In this the court declared that a cartel 
was not only not contrary to the principle of free industry, but was 
often in the interest of the public as well as of the members of the 
cartel. As regarded the claim that the cartel was contrary to the 
principle of industrial liberty, the court said : 

This objection can not, however, be regarded as well founded. The associa- 
tion which appears in this case as plaintiff was established, as is expressly 
stated in its statutes and is not disputed in the pleadings, in order to prevent in 
the future a destructive competition beween the Saxon wood-pulp manufacturers, 
and to make possible the attainment of higher prices than could be gotten with 
unrestricted competition. 

After noting that associations for such a purpose are of teh re- 
garded, " especially outside of Germany," as violating the principle 
of industrial liberty and the public interest which that principle aims 
to further, the court continued: 

If in any branch of industry the prices of the products sink too low, and the 
thriving operation of the industry is thereby made impossible or endangered, 
then the crisis which occurs is destructive not only to the individuals but also 
to the social economy in general, and it lies therefore in the interest of the 
whole community that immoderately low prices shall not exist permanently in 
any industry. 

Hence the court concluded that cartels are not improper in prin- 
ciple, but it indicated that this conclusion does not justify them 
absolutely in all cases : 

To contracts of the kind under consideration, therefore, exception can be 
taken from the standpoint of the protection of the general interests through 
industrial freedom only if in individual cases objections arise from particular 
circumstances, especially if there is an evident purpose of establishing an actual 
monopoly and of effecting an usurious exploitation of the consumers, or if these 
consequences are actually brought about by the agreements and arrangements 
made. 3 

1 Urt. v. 20 Oct. 1880, Entsch. des RGer. in Civilsachen, Vol. II, p. 120. 
2 Urt. v. 25 Joui, 1890, Entsch. des RGer. in Civilsachen, Vol. XXVIII, p. 244. 
3 Urt. v. Feb. 4, 1807, Entsch. des RGer. in Civilsachen, vol. xxxviii, pp. 156-158. 



TRUSTS IX FOREIGN COUNTRIES. 65 

This last statement is of especial interest, because it shows that the 
court recognizes at least a theoretical limit to the freedom of combi- 
nation. This limitation, however, does not seem to have any great 
practical value, inasmuch as there are various cartels which have 
organized a practical monopoly and have pursued what may be fairly 
termed extortionate price policies, in the face of bitter complaint and 
against litigious parties, without the legality of their constitution 
being called in question. 1 

It appears, therefore, from the uniform judgments of the imperial 
court that the cartels are not regarded as infringing the principle of 
industrial liberty. 

Under the civil code the cartel contracts have likewise been de- 
clared lawful. There are only two articles of interest here, which 
read as follows: 

Art. 13S. A jural act that is repugnant to morality is void. 
Art. S26. Whoever, in a manner repugnant to morality, intentionally inflicts 
an injury upon another is bound to such other for compensation of the injury. 2 

It does not appear that any efforts have been made to attack the 
validity of cartel contracts under the first of the above sections 
(138). but decision was rendered on the same point of law in a num- 
ber of cases before the present code went into effect. An early cartel 
case was decided in the highest Bavarian court (oberstes Landge- 
richt) in Munich. April 7, 1888. In this case the court declared that 
a cartel contract of certain tile manufacturers to limit production 
and fix minimum prices was not only valid, but also a prudent busi- 
ness arrangement. The court denied that either the aim or the means 
adopted in such an agreement was contra bonos mores. 2 

Of much greater importance, because decided in the imperial court, 
was the case of the book publishers' cartel referred to above. It 
was claimed that this cartel was contrary to good morals and public 
order. The court said that such a point of view might be relevant, 
if it were shown that a combination had been formed to control the 
market and to check the free play of economic forces for speculative 
purposes, but went on to say : 

A complete distinction should be drawn between such combinations and 
associations of fellow craftsmen for the purpose, pursued in good faith, of main- 
taining an industry on a living basis through protection against depreciation of 
products and against other disadvantages arising from the price cutting of 
individuals. 4 

The other article of the civil code (826) cited above might have 
some application to the malpractices of cartels, but not to their legal 
existence. A case came up recently wherein a steamship line tried 
to force a competing line out of a certain trade by refusing to take 
freight at the ordinary rates from one of its large shippers if he con- 
tinued to patronize the competing line. The injured shipper brought 
suit to compel the steamship line to desist from such action. The 
claim of the plaintiff was sustained in the court of first instance, 

1 E. g. Halbzeugverband, Cokssyndicat. 

2 Burgerliches Gesetzbuch fur das deutche Reich, arts. 138, 826. For " Rechtsge- 
scbaft," here rendered " jural act," there is no precise English equivalent ; it includes 
all acts by which individuals endeavor to produce legal results — contracts, conveyances, 
etc. The phrase translated " morality " is " die guten Sitten," which is itself a transla- 
tion of the Latin " boni mores." 

3 Steinmann-Bucher, Schmoller's Jahrb., 1891, pp. 186, 187 ; Menzel, op. cit., pp. 43, 44. 
*Urt. v. 25 Juni, 1890, Entsch. des RGer. in Civilsachen, vol. xxviii, pp. 243, 244. 

67838—12 5 



66 TRUSTS IN" FOREIGN COUNTRIES. 

denied on appeal, but again sustained in the imperial court. The 
imperial court said, in part: 

Article 826 is adapted and also intended by the legislator to establish a pro- 
tection against unfair treatment in a comprehensive manner, particularly for 
business intercourse, in so far as provision is not made through special laws. 1 

The court suggested that an action for extortion might lie. It 
also pointed out that the obligation of a common carrier (Trans- 
portzwang) was established in Germany for railway transportation 
only, not for other land carriage nor for sea carriage, and suggested 
that such a compulsion might appear to be necessary, especially 
against enterprises which subserved a public interest and which pos- 
sessed, legally or de facto, a monopoly of such service. Meanwhile, 
even in the absence of any legal duty to render the service, the arbi- 
trary and unfair refusal of transportation at the ordinary rates was 
to be regarded as an action contra bonos mores. As a standard of 
morals within the meaning of article 826, the court accepted the sense 
of propriety (Anstandsgefuhl) of right-minded persons and in com- 
mercial matters the views and sentiments of honorable business men. 2 

Although this case had no direct relation to the cartels, the position 
taken by the court is of much interest as showing its attitude toward 
monopolies and toward practices in which cartels are frequent 
offenders. 

In this connection may be noticed again the case of the book pub- 
lishers' cartel. The court denied the claim of the plaintiffs to 
damages from the cartel upon the ground that the record showed 
no injury, but it did not decide whether the means used by the cartel 
against outsiders, viz, total exclusion from supply of books, refusal 
to furnish the trade journal or to publish advertisements therein, 
denial of certain rebates, and the publication of a black list in the 
trade journal, were lawful or not, although it intimated that they 
were not lawful. 3 

The courts have not only refused to declare cartel contracts illegal, 
but they have also expressly declared them valid, including the pen- 
alty clauses embraced therein for violation of such agreements. 
Thus, in the above-cited Saxon wood-pulp cartel the refusal to pay 
the conventional fines was declared a breach of a lawful engagement. 4 
This decision was made before the code in its present form went into 
effect, but the same principles were applied as in the recent case 
regarding the interpretation of the agreement of the coal syndicate. 
Speaking of this agreement, the court said : " against the validity of 
which well-founded objections do not exist." The court declared 
that the Hannibal mine must perform its obligations under the agree- 
ment or pay damages. 5 A still more recent case, in which the validity 
of a cartel agreement was involved, concerned the right of a member 
to withdraw. The court held the agreement to be a valid one, but 
declared that a member might withdraw in case the other parties 
made the proper fulfillment of the contract impossible. 6 

*Urt. v. April 11, 1901, Entsch. des RGer. in Civilsachen, vol. xlviii, p. 119. 

2 Urt. v. Apr. 11, 1901, Entsch. des RGer. in Civilsachen, vol. xlviii, pp. 123-127. 

3 Urt. v. 25 Juni, 1890, Entsch. des RGer. in Civilsachen, vol. xxviii, pp. 239-241, 245- 
251 ; cf. Menzel, op. cit., pp. 44, 45. 

* Urt. v. 4 Feb., 1897, Entsch. des RGer. in Civilsachen, vol. xxxviii, pp. 155, 156. 
e Zeche ver. Hannibal W. Rheinisch-Westfalisches Kohlensyndikat, Urt. v. 19 Feb., 1901, 
Entsch. des RGer. in Civilsachen, vol. xlviii, pp. 308-315. 

6 Urt. v. 6 Nov., 1902, Entsch. des RGer. in Civilsachen, vol. liii, p. 19. 



TRUSTS IN FOREIGN COUNTRIES. 67 

In the opinions of jurists may be found some useful criticism of 
the meaning and possibilities of the present law. The subject was 
considered with much minuteness in the twenty-sixth convention 
of the German jurists in 1902, and was again under consideration 
at their recent meeting in the autumn of 1904. One of the promi- 
nent speakers in the convention in 1902 declared that the existing 
law was sufficient to prevent objectionable practices, i. e., associations 
aiming at monopoly could be attacked at their establishment under 
article 138 and in their operation under article 826. 1 Landesberger 
expressed the opinion that it was possible to test the validity of 
cartel contracts generally under article 138, and supported his opin- 
ion by a citation from the opinion of the imperial court in the Saxon 
wood-pulp-manufacturers' case. He said : 

I do not hold it (art. 138) as totally inapplicable. Cartel agreements and 
cartel resolutions of a directly usurious character or acts done in the execution 
of cartel resolutions which were demonstrably intended to ruin an outsider 
might well be characterized as contra bonos mores. 2 

He confessed that in any case the article was applicable only in a 
very limited range of cases. (Rundstein takes a somewhat similar 
position, holding that article 138 would apply, if cartells possessing 
a monopoly were guilty of exploiting the public, or if it could be 
proved that they intended to do so. 3 ) Boy ens thought that a cart ell 
contract that did not provide a fair arrangement between the mem- 
bers — one, for example, that gave the large members too much power 
over the small members — might be contra bonos mores in the sense 
of article 138. 4 It is interesting to observe that the original draft of 
article 138 had a wider scope, invalidating not only jural acts that 
were repugnant to morality, but also such as were repugnant to pub- 
lic order. 5 

A good deal of hope, in a small way, appears to be put in the pro- 
visions of article 826. For example, Juliusberg thinks that boycotting 
and usurious exploitation through exorbitant prices may be made a 
ground of action for damages under this article. 6 Boyens claims 
that intentional underbidding, with the aim of preventing a competi- 
tor from working without loss, or of compelling him to enter a car- 
tell, may be attacked under this article as an effort to cause damage 
to another in an immoral fashion, and that such proceedings may be 
contested both preventively and repressively. For these reasons, 
also, a cartell might be declared invalid. 7 Menzel, on the other 
hand, thinks that article' 826 is of little practical significance in op- 
posing cartell excesses, because a judgment can seldom be obtained 
on account of the difficulty of proving malice (dolus). 8 

II. AUSTRIA. 

In no important industrial country in Europe are the laws less 
favorable to industrial combinations than in Austria, but in hardly 

*Nentwig, im 26ten Juristentag, p. 292. 

2 Landesberger, im 26ten Juristentae. p. 350. 

3 Rundstein, Das Recht der Kartelle. Berlin, 1904, p. 62. 

4 Bovens, im 26ten Juristentag, p. 329. 

5 Cf. Menzel, op. cit., pp. 35, 36. The term used was " offentliche Ordnung," which may 
be taken as precisely equivalent to the French " l'ordre public," and substantially equiva- 
lent to the English " public policy." 

6 Juliusberg, Die Kartelle und die deutsche Kartellgesetzgebung, Berlin, 1903, p. 32. 

7 Boyens, im 26ten Juristentag, pp. 338, 339. 
s Menzel, op. cit., p. 43. 



68 - TRUSTS IN FOREIGN COUNTRIES. 

any other country are such combinations more numerous. The laws 
concerning them were established at a period before they had ac- 
quired the significance that they possess to-day, and the application 
of these older laws to cartel agreements has been sometimes disputed. 
The policy of the Austrian Government has tended recently to in- 
crease the restrictions placed on combinations, but the legislative 
projects in this direction have not been enacted into law. 

There are no penal laws against industrial combinations. The 
penal code of 1852, which in general is still in force, provided that 
" agreements of persons engaged in industry (Gewerbsleute), manu- 
factures (etc.) * * * to raise the price of a commodity * * * 
to the disadvantage of the public or to reduce the same to their own 
advantage or to cause a scarcity," should be punished as misde- 
meanors. 1 The provisions of this section were abrogated by the 
law of April 7, 1870, which declared that such agreements should be 
deemed repugnant to the penal law only in case intimidation or 
force were used. The Austrian criminal law, therefore, now con- 
tains no provisions specially applicable to cartells. 2 

It should be noted, however, that while the law of April 7, 1870, 
abolished the penalties previously imposed on industrial combina- 
tions, it did not legalize them from the point of view of the civil 
law. On the contrary, article 2 of the law of 1870 declares that 
certain agreements concerning the giving or taking of employment, 
etc., "have no legal operation." Article 4 declares: "The pro- 
visions contained in articles 1 and 2 have application also to agree- 
ments of persons engaged in industry (Gewerbsleute) with the 
purpose of raising the price of a commodity to the disadvantage of 
the public." 3 

The law of 1870, therefore, made industrial combinations void, 
but, on account of the character of the law of procedure existing 
before 1895, this declaration of the statute could be evaded, for most 
practical purposes, by providing that any matters of dispute in re- 
gard to the obligations of the parties to the agreement should be 
submitted to a private board of arbitration, established by the said 
agreement. According to the law of procedure existing before 1895, 
the decisions of such an arbitration were binding and could be an- 
nulled in the courts only in case of open fraud. 4 The law of pro- 
cedure was altered in 1895 by the introduction of a new code, which 
declares that the decisions of a private court of arbitration are in- 
operative " if repugnant to compulsory rules of law," and it is pro- 
vided that parties can not lawfully renounce their right of appeal to 
the courts in such cases. 5 

There have been some important judicial decisions in Austria 
respecting the validity of cartel agreements, interpreting the law 
of 1870. It is remarkable that no cases came up for decision until 
within the last decade, and after Prof. Menzel had pointed out its 
application in his celebrated discussion of the subject before the 
Verein fur Sozial-Politik in 1894. 

1 Strafgesetzbuch vom 27 Mai, 1852, art. 479. 

2 Cf. Menzel, op. cit., p. 19. 

3 Gesetz vom 7 April, 1870, Reichsgesetzblatt fur die im Reichsrate vertretenen Konig- 
reiche und Lander, Jahrg. 1870. 

*Allgemeine Gerichtsordnung, art. 273. 

- Civilprocessordnung, vom 1 Aug., 1895, art. 595. 

There is also a provision in the Austrian civil code (Allgemeines burgerliches Gesetz- 
buch, art. 878), very similar to art. 138 of the German civil code, mentioned above. 



TKUSTS IN FOREIGN COUNTRIES. 69 

The first cartel case to be decided was with respect to a cartel of 
oleum producers, which had been organized in 1887 for a limited 
period for the regulation of the sale of oleum, chiefly, though not 
exclusively, in the export trade. A suit was brought for damages 
for breach of the terms of the agreement, and the defense was made 
that the contract was invalid under the law of 1870. The supreme 
court (oberster Gerichtshof) held that the agreement was invalid, 
and denied the claim for compensation. The court said : " The plain- 
tiff objects, with justice, that such an agreement is without legal 
operation." The decision of the court depended largely on verbal 
definitions. The word " Gewerbsleute " was held to include every 
industrial producer, and the word " Gewerbe " was held to be appli- 
cable to factory production as well as to handicraft. Popular use, it 
seems, had come to restrict "Gewerbe" to the form of industry 
practiced by petty craftsmen and artisans, but the court pointed out 
that the term was used in various laws to embrace factory industry 
and that there was no reason to suppose that the legislator intended 
to protect the public against the extortion of handicraftsmen only. 
The court also held that proof of the advance of prices was not neces- 
sary, and that a limitation of the agreement in respect to the area or 
term of operation did not make it lawful. 1 

Another cartel case came before the supreme court of Austria 
m the following year (1899) concerning a combination among the 
tallow producers (Federweisscartel) of Styria, which had estab- 
lished a central selling bureau in Vienna for a term of five years. 
Conventional penalties were provided for breach of the agreement. 
A firm which was a member of the cartel brought an action to obtain 
a judgment that its contract under the cartel agreement was in- 
valid, but this claim was rejected in the local and provincial courts. 2 
The supreme court took the same view as in the case noticed above, 
and declared the compact void. In regard to prices the court said 
that it was not necessary to prove that there had been an advance of 
the same to the disadvantage of the public, but that the intent to 
raise prices could be deduced from the nature of the agreement. 
Such an indication of intent appeared in provisions for the limita- 
tion of output or for the regulation of prices by a central bureau, etc. 
The court defined the meaning of the statute further by declaring 
that the rule applied not only to finished products and articles of 
daily use, but also to unfinished goods and goods used in production. 3 

We may notice, finally, a third case, which was decided on ap- 
peal in a provincial court. The cartel concerned was that of the 
Austrian enameled utensil producers. The court of original in- 
stance declared the cartel contract null and void, but held that the 
contracts between the cartel members and their agent — the provincial 
bank — were valid. The upper provincial court denied the validity 
of all these contracts. The court said in part: 

There is no doubt that the agreement of the plate and enameled utensil car- 
tel has simply the purpose to raise the price of an article of consumption at 
present necessary and of general use, or to prevent the decline of the same 
* * * If the defendants claim, therefore, that they aim simply at the resto- 

1 Entsch. v. 20 Jan., 1898, Sammlung v. civilrechtlichen Entsch. des k. k. obersten 
Gerichtshofes, vol. xxxv, no. 242. 

2 Grunzel, Ueber Kartelle, Leipzig, 1902, p. 147. 

3 Entsch. v. 6 April, 1899, Samml. civilrechtl. Entsch. des k. k. ohersten Gerichtshofes, 
vol. xxxvi, no. 3419. 



70 TRUSTS IN FOREIGN COUNTRIES. 

ration of the market to normal conditions, then that is simply to be understood 
in the interest of carteled firms, but not in the interest of the public. * * * 
The objection that since the formation of he cartel the retail prices have 
fallen is irrelevant, according to the coalition law, as regards the legal opera- 
tion of the cartel. 1 

It seems that the court regarded the contracts between the car- 
telled producers and the bank which acted as their agent as invalid, 
on the ground that the general organization fixed the prices and the 
bank was, in effect, an organ of the cartell and not a third party. 2 

The criticism of jurists is of considerable interest in connection 
with the Austrian law. Menzel wrote, in 1894, that "Austria is the 
only State which possesses an explicit and unambiguous legal norm 
concerning the validity of cartell agreements." 3 Nevertheless the 
lower courts have not shown perfect agreement with the supreme 
court as to the meaning of the law, and some intelligent writers 
have strongly objected to the position taken by the supreme court. 
Hitchmann, for example, criticises the declaration of the court in the 
tallow producers' cartel case, on the following grounds: (1) There 
was no express price agreement, which he thinks should be necessary 
to bring it clearly within the prohibition of the law; (2) " Gewerbs- 
leute " does not include manufacturers, but designates only petty 
craftsmen; and (3) the "public" does not mean a particular group 
of people, but the people generally, who are interested in the prices 
of consumption goods only. 4 

Grunzel (who is in a measure a representative of the industrial 
interests) also objects strongly to the interpretation of the law given 
by the supreme court. He holds with Hitchmann that neither law 
nor custom warrants applying the term " Gewerbsleute " to large 
corporations. Further, he denies that the existence of a cartell is 
sufficient evidence of intent to raise prices, and asserts that most car- 
tells do not attempt to raise prices, but try to keep them from falling. 
He points out that the law expressly states that agreements designed 
to advance prices are unlawful, and he ridicules the attitude of the 
court in saying that the proof that retail prices have fallen is irrele- 
vant. He holds also with Hitchmann that the commodities embraced 
within the meaning of the law are those of general use, and would 
not include, for example, locomotives or potash. 5 

Still more significant is the statement made in the explanation of 
motives which accompanied the celebrated Austrian cartell bill of 
1897. The representatives of the Government expressed doubts as to 
how far the law of 1870 would be applicable in respect to the validity 
of cartell agreements. According to the opinion expressed therein, it 
would not affect (1) cartells for the maintenance (not increase) of 
prices ; (2) cartells for the depression of the prices of the raw material, 
whether directly, or indirectly by a rayon agreement; and (3) cartells 
to procure more favorable arrangements as to freights, insurance, etc. 6 

In regard to the question whether prices have been advanced or 
not, attention should be called to the wording of the statute, which 
expressly regards aim or purpose (Zweck). Rundstein approves 

1 Quoted from Grunzel, op. cit., p. 148. 

2 Cf. Landesberger, im 26ten Juristentag, p. 354. 

3 Menzel, op. cit., p. 19. 

4 Hitchmann, Kartelle vor Gericht, Handelsmuseum, 16 Nov., 1899, pp. 541, 542. 

5 Grunzel, op. cit., pp. 144-149. 

6 Regierungsvorlage, Gesetz vom * * * iiber Cartelle in Beziehung auf Verbrauchs- 
gegenstande, u. s. w., 154 der Beilagen zu den Stenogr. Protokollen des Abgeordneten- 
hauses, XV Sessions. 1898, erlauternde Bermerkungen, pp. 23, 24. 



TRUSTS IN FOREIGN COUNTRIES. 71 

of the position taken by the courts that the actual price movement is 
immaterial. 1 

In spite of the unfavorable attitude of the law, cartells have 
nourished in Austria almost as vigorously as in Germany. They 
exist, as Landesberger says, according to the maxim: "Where there 
is no plaintiff, there is no judge." He says that the cartells might be 
attacked successfully only if an action by outsiders (actio popularis) 
were allowed, though even such an action would not do much more 
than procure a formal declaration of nullity. Such agreements exist, 
in other words, not by virtue of law but on the basis of business con- 
venience and commercial faith and credit — " but only as long as self- 
preservation is not at stake." Their existence and practical oper- 
ation depend on the interests of private parties in maintaining or 
destroying them, so that under the existing law the good ones may be 
destroyed and the bad ones may survive. The effect of the law of 
1870, therefore, according to this authority, is to deprive parties of 
the right of complaint for the nonobservance of cartell agreements, 
and to make them void in all matters for which the courts have to 
consider them. 2 

III. FRANCE. 

The era of the Revolution was marked by the abolition of the 
ancient corporations, maitrises, or jurandes, and by the enactment of 
severe laws against combination. The law of June 14—17, 1791, de- 
nounced agreements of members of the same trade to fix the price 
of their industry or labor as " unconstitutional, hostile to liberty, 
and of no effect." 3 On July 26, 1793, the " loi contre les accapareurs," 
i. e., the law against engrossers and the like, was adopted, which 
threatened offenders with the penalties of death and confiscation. 4 
Just before this, on May 4, 1793, the famous law of the maximum 
had been established, i. e., a law which fixed the maximum price for 
each of a great variety of articles, in order to afford a prompt remedy 
against monopoly. 5 Most of the legislation of the "Revolution in this 
direction was of an ephemeral character, but the law against l'acca- 
parement, with less severe penalties, was embodied in the penal code 
of 1810, articles 419 and 420, and has continued to the present day. 
The more important of these articles reads as follows : 

Akt. 419. All those who by false or calumnious reports sown by design in 
the community, by offers of prices in advance of those asked by the vendors 
themselves, by union or coalition between the principal possessors of the same 
merchandise or commodity not to sell or to sell at a certain price only, or by 
whatever fraudulent ways and means, shall have effected the advance or de- 
cline of the prices of commodities or merchandise or of public securities above 
or below the prices which the natural and free competition of trade would have 
fixed, shall be punished with imprisonment of one month at least or of one year 
at most and with a fine of 500 francs to 10,000 francs. The culprits may, 
further, be placed by decree or judgment under the oversight of the superior 
police during two years at least and five years at most. 

1 Rundstein, op. cit., p. 54. 

2 Landesberger. im 26ten Juristentag. pp. 350-355. It is noteworthy that the Kauf- 
mannischer Verein of Vienna recently condemned any attempt by a member of a cartell 
to escape his contractual obligations by recourse to the courts. (Cf. Kartell-Rundschau, 
1904, p. 435.) 

3 Loi relative aux assembles d'ouvriers et artisans de meme etat et profession, 17 juin, 
1791, Lois et actes du gouvernement, vol. iii, Paris, 1834. 

* Babied. Les syndicats de producteurs et detenteurs de marchandises, Paris, 1893, 
p. 126. De Birague, op. cit., pp. 61, 62. 
5 Babied, op. cit., p. 128. 



72 TRUSTS IN FOREIGN COUNTRIES. 

The following article (420) provides heavier penalties if the 
commodities in question are breadstuffs, bread, or wine or other 
potables. 

Since the adoption of this code other laws of minor importance 
have been enacted concerning combinations under particular con- 
ditions. 1 For our present purpose these require no notice. One law, 
however, not directly concerned with our subject, requires attention, 
because it has been declared in some quarters to abrogate articles 
419 and 420 of the penal code. This is the law of March 21, 1884, 
concerning the establishment of trade associations. In article 3 of 
this law the aim of the associations authorized is defined as follows : 
" Professional syndicates have for their exclusive aim the study and 
defense of economic, industrial, commercial, or agricultural inter- 
ests." 2 The courts have held, as seems only reasonable, that this does 
not permit them to violate a criminal statute from the operation 
of which they are not expressly excepted. 3 

One of the earliest cases involving the status of cartels under 
the criminal code was that of certain soda manufacturers of Mar- 
seille, which was decided in 1838. The manufacturers had formed 
a combination to sell all their output through the agency of one 
Mille, who added the precaution of hiring six factories which were 
not in operation, in order to prevent the reestablishment of compe- 
tition. Prices were advanced about 25 per cent, although the price 
of the raw material had declined. The court of cassation declared 
briefly that this combination came within the prohibition of article 
419. 4 In a case decided in the same year the court of cassation 
declared that a combination of concerns in the form of a fusion or 
consolidation was not an illegal coalition within the meaning of 
that article, because a plurality of persons was necessary, and this 
was not found in a single juristic person (personne morale). 5 In the 
year following (1839) an action was brought against a coach com- 
pany respecting agreements as to the price of places, and the court of 
cassation declared that the commodities embraced in article 419 
included incorporeal as well as corporeal goods. 6 

The following decision illustrates the application of the law where 
prices are depressed by combination. A case came before the court 
of cassation in 1879 concerning a combination among the manufac- 
turers of iodine, who employed a common purchasing agent, divided 
up the field which supplied the raw material, and fixed the prices of 
the same. The court said that this was a combination " organized 
by the principal manufacturers of iodine," tending to give to the 
commodity prices above or below the course which would have been 
determined "by the free and natural competition of commerce," 
and was repugnant, therefore, to article 419 of the penal code and 
to article 1133 of the civil code. 7 

1 Cf. Colliez, Trusts, cartels, corners, Paris, 1904, p. 467 ; Merlin, Les associations 
ouvriers et patronales, Paris, 1899, p. 129. 

^Loi 21 mars, 1884, relative & la creation des syndicats professionnels. 

8 Vide infra, p. 32, A. et autres c. Germain-Perret, Cour de Lyon, 21 Avril, 1896, Jour- 
nal du Palais, 1896, pt. ii, p. 164. 

4 Mille et autres fabricants de soude de Marseille c. Ministere public, Cour de Cassation, 
31 aout, 1838, Journal du Palais, 1838, p. 391. 

B Bulletin des arrets de la Cour de Cassation Criminelle, 1838, p. 40. 

6 Cour de Cassation, aout, 1839, Journal du Palais, 1839, p. 297. 

7 Cournerie c. Pellieux et MazeVLaunay, Cour de Cassation, 11 fev., 1879, Journal du 
Palais, 1879, p. 490. 



TRUSTS IN FOREIGN COUNTRIES. 73 

The earlier judgments of the French courts showed a tendency 
to interpret and apply article 419 in a comprehensive and effective 
manner. The modern tendency has been less rigorous. The opinion 
of the court of Paris in the following case is a good illustration of 
this statement. It is quoted at considerable length, because it shows 
very clearly the mode of reasoning adopted bj r the courts at the 
present day. The judgment is prefaced by a statement of the facts : 

That Ferry and May have made contracts like those in question with all the 
other principal producers of phosphates of the Somme; that the production of 
all the adherents thus grouped together is about two-thirds of the total produc- 
tion of the Somme; that the agreements present the appearance of a contract of 
commission, but it is not the less evident that they have for their end simply 
the monopoly (l'accaparement) of the product to the profit of the group di- 
rected by Ferry and May, and of the two latter themselves; that in fact each 
of the adherents must limit his production to a fixed figure; that he is forbidden 
furthermore to sell or deliver directly, under any form whatever, either in 
France or abroad, any crude phosphates, dry or milled, of a standard equal to 
or higher than dry 60 per cent tribasic calcium phosphate ; that a penalty was 
stipulated in case of infraction of this clause ; and that the minimum and maxi- 
mum selling price was fixed semiannually in a general meeting convoked by 
the order of a supervisory committee. 

On the basis of these facts the court reached the preliminary 
conclusion : 

That such agreements are illegal; that they constitute, in fact, a true coali- 
tion, tending to advance the course of phosphates above the price which would 
be fixed by free competition and to prevent sale below the price thus artificially 
increased ; that they fall, therefore, under article 419 of the penal code and 
would be in consequence null, as contrary to public order. 

Certain other facts and considerations, however, were recognized 
as modifying this conclusion: 

Considering that it is necessary, in order that article 419 apply, that there 
be a union or coalition between the principal holders of the same merchandise 
or commodity, with the intent of not selling except at a price different from that 
which would have been fixed by free competition ; that it is proper to inquire, 
if in the present case evidence is found of this double fact, both as concerns the 
union or coalition and as concerns the end sought or obtained. 

Considering that it is proper first of all to observe that the merchandise in 
question (phosphates) is a product which, be it of the same grade, be it a grade 
of less richness as to the tribasic calcium phosphate which it contains, is met 
with not only in the Somme but is further distributed in great quantity over 
the whole surface of the earth and notably in various parts of France, Belgium, 
and America ; * * * 

Considering, on the other hand, that, if it be true that a certain number of 
the producers of the Somme are grouped around Ferry & May. their common 
agent, by their adhesion to contracts similar to that of December 26, 1SS7, it 
is proper to remember that this group, as results from the explanations fur- 
nished at the bar by Cajot & Cie. themselves, represent only two-thirds of the 
total production of the Somme; and that, if it is true, as is observed, that by 
reason of the geographical situation of the deposits the operations of the said 
group can have a great importance upon the French market, it is established, 
on the other hand, that this group is held in check, as well by the outside pro- 
ducers of the Somme, as by other French and foreign producers ; * * * 

In view of these facts, the court declared that there was not " the 
union or coalition between the principal holders of the commodity " 
mentioned in article 419 of the penal code. The court added the fol- 
lowing significant statement: 

That this syndicate comprises in reality but a part of the phosphate works 
of the arrondissement of Doullens; that they have agreed upon the determina- 
tion of the amount of their output, in order to assure the movement to market 



74 TRUSTS IN FOREIGN COUNTRIES. 

and principally the exportation of the same, and for the defense of their com- 
mon interests, and to fight without disadvantage the competition of numerous 
markets, as well in France as abroad ; that one can not demonstrate in respect 
to it either monopoly, or attempt at monopoly of the said commodity. 1 

A case of international notoriety, and of some interest on account 
of the points of law involved, arose in connection with the famous 
copper corner (1887-1889) engineered by Secretan in Paris. Appeal 
was taken to the court of cassation from the judgment of the court 
of Paris, but the same was affirmed on grounds substantially as fol- 
lows : Secretan had caused an advance in the price of copper by his 
contracts with producers in various parts of the world, who were 
cognizant of his objects and hoped to profit by his operations, but 
who had made no agreements with each other. The price of copper, 
furthermore, was not agreed upon, nor was there any attempt to fix 
it, though it was hoped and expected that it would be advanced. In 
considering this situation with respect to article 419 of the penal 
code, the court of Paris declared that the agreement of Secretan as a 
buyer with the producers as sellers was such as to bring it within the 
prohibition of the law, as the combinations forbidden by the law did 
not have to be exclusively among either buyers or sellers, and the 
agreements of the various producers with Secretan were in effect, 
though indirectly, an agreement among the producers. One circum- 
stance, however, essential to the proof of a violation of the law was 
lacking, namely, an agreement as to the price. From the nature of 
the arrangement this could only exist in the assumption by Secretan 
of an obligation to sell only above a certain price, and no such con- 
dition was to be found in the contracts. Hence the court concluded 
that the law had not been violated. 2 

A rather interesting case came up in 1892 concerning a combina- 
tion of pottery manufacturers near Grenoble who had established a 
central selling agency. In view of the facts that the agreement was 
limited as to time and as to markets, that it embraced only a minority 
of the producers of the commodity, and that the prices had fluctuated 
with the market, the court concluded that the agreement was not an 
unlawful one under article 419. 3 

The courts do not always take this benignant attitude, even at the 
present day, as may be seen from the next case, which also shows the 
interpretation put on the law of 1884, regarding syndicats profes- 
sionels, with respect to article 419 of the penal code. Germain- 
Perret brought a complaint against certain dealers in aerated waters 
with whom he had been associated, namely, 18 of the principal deal- 
ers of Lyons, who had formed a syndicate in 1891. This syndicate 
determined the selling price under the sanction of conventional 
penalties, among which was exclusion from the syndicate, with 
notice of the fact to the parties who operated the springs, from whom 
the supplies were obtained, and with whom the dealers had an under- 

1 Cajot et Cie. c. Ferry et May, Cour de Paris, 14 avril, 1891, Journal du Palais, 1892, 
pt. ii, p. 150. 

2 Secretan c. Soctete" des Metaux, Cassation, 24 avril, 1891, Journal du Palais, 1901, 
pt. ii, p. 227, note. This decision has not met with universal approval. De Birague 
writes (op. cit., p. 98) : " Pour que la condamnation soit possible, il n'est d'ailleurs pas 
n6cessaire que Ton rapporte la preuve d'un engagement expres pris par les coalises, de 
ne vendre qu'a. certaines conditions ; il suffit qu'il rcssorte suffisamment des debats que 
tel etait le but auquel tendait la coalition. La decision contraire, rendue par la Cour 
do Paris dans l'affaire des Metaux. est ggngralement critiquee." 

■" P.onneton c. Societe des Tuileries, Cour de Grenoble, 1 mai, 1894, Journal du Palais, 
1894, pt. ii, p. 278. 



TKUSTS IN FOKEIGN COUNTRIES. ' 75 

standing that they should be supplied exclusively. In consequence 
of the fact that he was no longer a member of the syndicate, Germain- 
Perret found himself unable to supply himself with mineral waters, 
except by indirect and more expensive methods. The court said : 

Considering that the coalition in question has thus had the effect of advanc- 
ing the price of waters to hiin above that which would have been fixed by the 
natural and free competition of trade. * * * 

Considering that the right accorded by the law of March 21, 1884, to form 
syndicates could not exonerate the accused from the responsibility incurred 
by them by reason of the above facts; that, even if the syndicate established by 
them in 1S91 had been within the terms of that law, the exercise of the rights 
conferred by it can not render lawful the violation of the prohibitions decreed 
by articles 419 and 420 of the penal code, which have not been abrogated by 
that law and are still in force. 1 * * * 

An attempt to form a monoply contrary to article 419 of the penal 
code was condemned very recently in the case of the St. Astier Lime 
Co. This was an association "sous nom collectif." The plaintiff, 
Mallebray, demanded the dissolution of the association, on the ground 
that it was formed with the sole purpose of suppressing competition 
among the lime manufacturers of St. Astier. The defendants de- 
clared, on the other hand, that it was not an unlawful coalition, such 
as had formerly existed among them and had been dissolved by 
judicial decree (Dec. 16, 1890), but a legally organized association. 
This combination was condemned, nevertheless, on the ground stated 
in the complaint. 2 

The French civil code contains certain provisions which are of 
significance with regard to the legality of industrial combinations, 
namely : 

Art. 6. Laws which concern public order and good morals may not be set 
aside by agreements of individuals. 

Art. 1131. An obligation that is groundless or is based on a false ground or 
on an unlawful ground can have no effect. 

Art. 1133. The ground is unlawful when it is prohibited by law or when it is 
contrary to good morals or to public order. 

The provisions of the civil law have often been applied to indus- 
trial combinations by the courts, generally in connection with article 
419 of the penal code, but sometimes independently where the penal 
code could have no application. A comparatively early case dealt 
with an oral agreement of five quarrymen near Liverdun not to 
deliver stone for the construction of a fort at a price lower than 3.50 
francs per cubic meter. The court of Nancy, which tried the case, 
said that while article 419 of the penal code might not apply, }'et this 
agreement was, nevertheless, " contrary to the principles of free com- 
petition," and a serious attack on commercial liberty. Hence the 
court declared it " null and of no effect, as having an unlawful basis." 3 

In the case of the iodine manufacturers (cited above, p. 29, in 
connection with art. 419 of the penal code) one ground for the de- 
cision was that it was an invalid agreement under article 1133 of the 
civil code. In the case of the phosphate manufacturers (cited above, 
p. 29) the lawfulness of the agreement was also questioned under the 
civil law, but the court declared that there was " no condition re- 
strictive of the liberty to sell phosphates which the defendants were 

1 A. * * * et autres c. Germain-Perret, Cour de Lyon, 21 avril, 1896, Journal du 
Palais, 1896, pt. ii, p. 164. 

2 The decision of the lower court, here cited, will be found in the report of the pro- 
ceedings on appeal, cited infra, p. 35. , 

8 Cour de Nancy, 15 dec, 1874, Journal du Talais, 1875, p. 1114. 



76 TRUSTS IN FOREIGN COUNTRIES. 

eventually engaged to furnish." In the case of the lime manufac- 
turers of St. Astier (cited above, p. 33) the lower court had con- 
demned the combination on the ground of article 419 of the penal 
code ; on appeal the case was decided on the broader ground of articles 
1131 and 1133 of the civil code. The court said, in part: 

Adopting the motives of the first judges; considering, moreover, that it is not 
necessary, in order to pronounce the nullity of the association denounced by 
Mallebray, to establish that it unites all the conditions exacted for the appli- 
cation of article 419 of the penal code; that it suffices to establish that the 
obligation of the various parties had an unlawful basis and purpose; that such 
was the case of the members of the association criticized, since it results from 
the facts and circumstances of the case that the said association had been 
formed only in order to forestall and prevent the foundation at St. Astier of 
competing factories, which was contrary to the principle of liberty of commerce 
and industry; that thus the agreement attacked ought to be annulled also by 
application of articles 1131 and 1133 of the civil code. * * * * 

In considering the French law and the interpretation of the courts, 
the first impressions probably would be that they were characterized 
by uncertain^ and inconsistency. It is doubtful, however, if this 
impression is correct. In the interpretation of the various rules 
established by the law, it is the effort of the courts, as has been shown 
by the above citations, to ascertain whether there is a combination 
exercising a monopoly power in a manner injurious to the consumers. 
The matter is skillfully summed up by Prof. Levy-Ullmann in a note 
to a recent case in the Journal du Palais. Prof. Levy-Ullmann 
chooses to call all industrial combinations " trusts," hence this word 
is used in the translation. 

For the purpose of determining whether the trust submitted to their judg- 
ment constitutes or does not constitute a coalition of monopolists united to 
establish an artificial advance of prices, the judges seek first of all to discover 
whether the trust represents in the region where it operates the totality, or 
at least the majority in number and importance, of the producers of the com- 
modity. Further, tbey take into consideration the area in which the syndicate 
acts ; the more extended the area, the more vast the monopoly and the more 
difficult its destruction. The duration of the trust agreement furnishes still 
a third point to be considered. They examine, finally, its influence upon the 
course of prices ; from the balance of prices, before and after the association of 
the producers, from comparison of these with the results of free competition, 
is obtained, with a quasi mathematical precision, the tare of the trust. Num- 
ber of syndicate members, area of action, terms agreed upon, result as to 
prices — such is the quadruple determination which is established by the most 
recent decisions. 2 

Some of the other writers on this subject make a different analysis 
of the juristic elements of the offense prohibited in article 419. Thus 
Babied and Colliez agree in stating that the courts recognize the fol- 
lowing four elements, viz: (1) Plurality of agents; (2) principal 
holders of the commodity; (3) a defacto change in the price, 
above or below what would have been effected by free com- 
petition; and (4) an agreement not to sell except at such prices. 3 
It is true that Babied insists that the courts have erred in hold- 
ing that there must be an express agreement, and he points out that 
the text of the law prohibits combinations " tending " to the effects 
which it desires to prevent. 4 Apart from verbal distinctions, which 

1 Mallebray c. Compagnie gengrale des Chaux de Saint-Astier et autres, Bordeaux, 
2 Janvier, 1900, Journal du Palais, 1901, pt. ii, p. 225. 

2 Levy-Ullmann. in Journal du Palais, 90, art. ii, pp. 225-231, note. 

3 Babied, op. cit., pp. 134-137; Colliez. op. cit, 461, 462. 

* " * * * reunion on coalition entre les principaux dgtenreurs d'une meme mar- 
chandise ou denize, tendant a ne pas vendre," etc. Code P6nal, art. 419. 






TRUSTS IN FOREIGN COUNTRIES. 77 

are of considerable importance in the practical application of the law 
to this or that industry, etc., there are one or two points that may be 
noted more particularly. Article 419 furnishes protection against a 
combination of persons; but a fusion or consolidation, in general, 
escapes its prohibitions. Babied says that in such case, nevertheless, 
the parties may be attacked under articles 1131 and 1133 of the civil 
code. 1 and, indeed, that the courts in case of need should apply those 
sections ex officio. 2 In France, however, a fusion is an uncommon 
method of combination. If, on the other hand, the combination is 
made by establishing a company as a central agency, this, according 
to De Birague, will not enable the parties who have formed it and 
who control it to escape the law. 3 

Duchaine complains that the law is of little practical value in view 
of the almost undisturbed monopoly enjoyed by the sugar and oil 
combinations, 4 and Colliez calls it a " superannuated text," which 
does not correspond to the necessities of the present day. This writer 
in fact says that the benevolent attitude of the courts in recent years 
is " inspired perhaps by the desire to permit the French manufac- 
turers to combat with equal weapons against their foreign com- 
petitors." 5 

IV. CONCLUSION. 

A comparison of the laws concerning combinations in the three 
chief commercial States of continental Europe affords a valuable 
basis for the inductive determination of the proper principles of 
jurisprudence. It is doubtful whether a study of the whole field 
would add very much to the solution of the problem. 6 The three 

1 Babied, op. cit., pp. 178, 179. 
- Babied, op. cit., p. 182. 

3 De Birague, op. cit, pp. 00-93, 114. 

4 Duchaine, Les associations de producte\irs, Paris, 1903, p. 479. 

5 Colliez, op. cit., p. 470. 

6 The criminal code of Belgium contains a provision punishing the manipulation of 
prices by fraudulent methods only. (Code Penal, art. 311.) L'accaparement is not a 
delict. (Pandectes Beiges, vol. i, p. 998.) The provisions of the civil law are identical 
with those of France. (Code Civil, arts. 6, 1131, and 1133.) The courts have held that 
a cartel agreement which aimed to prevent a depression of prices was not invalid under 
the civil code. (Cf. De Leener, Les syndicats industriels en Belgique, Bruxelles, 1903, 
p. 207.) 

The situation in Holland is the same as in Belgium. The criminal code penalizes 
fraudulent price manipulations (Wetboek van Strafrecht, art. 334) and the civil code 
invalidates contracts that are repugnant to morality or public order (Burgerlijk Wet- 
boek, arts. 1371, 1373). As the two principal Dutch writers on cartels make no refer- 
ence to the legal situation in Holland, it may be inferred that the legality of such 
combinations has not been called in question by the courts. (Cf. Wibaut, Trusts en 
Kartels, Amsterdam, 1903 ; Schalk, Ondernemersvereenigingen, Leyden, 1891.) 

The situation in Italy is almost exactly the same as in Belgium. (Cf. Codice Penale, 
art. 293; Codice Civile, arts. 12, 1119, and 1122.) There have been a few cases on this 
subject in which the legality of cartels has been uniformly upheld. (Cf. Rundstein, 
op. cit., pp. 77, 78.) In a case in Naples in 1900 the court said, in part: "And in 
modern society, in which free competition is sanctioned by the prevailing principles and 
the right of association is recognized in full vigor, the exercise of this right of competi- 
tion by associations can not be regulated except by express legislation ; for it is not 
possible to admit that the power of individual capital has the right to impose a limit on 
the variation of prices and at the same time to deny this right to capital which is 
established either through association of capitalists or through association of producers 
of the same kind of goods." (Corti d' Appello, Napoli, 2 luglio, 1900, Annali della 
giurisprudenza italiana, vol. 34, marzo, 1900, pp. 460-462.) 

The Spanish law is substantially the same as the Italian, both in the penal and civil 
provisions. (Codigo Penal, arts, 557, 558, 593; Codigo Civil, art, 1116.) There appears 
to have been a judicial determination of the meaning of the penal provisions, but this 
was with respect to a labor combination. 

Hungary possesses no laws specially concerning cartels, but the courts have held that 
such combinations are invalid if they attempt to advance the prices of their products, 
to diminish the prices of their raw materials, or to reduce the commissions of middlemen. 
(Mandel. Entwurf zu einem Gesetz iiber die Kartellvertrage, Kartell-Rundschau, 1904, 
p. 683.) 

The Russian law of 1903, according to Rundstein (op. cit, p. 35), is similar to the 
Italian penal law. 



78 TRUSTS IN FOREIGN COUNTRIES. 

countries considered furnish excellent types of three ways in which 
industrial combinations may be treated. The French law forbids 
such combinations as conspire to advance prices above a competitive 
level; the Austrian law declares no criminal penalty against combi- 
nations, but by declaring their agreements null and void withdraws 
from them the protection of the courts; the German law not only 
does not condemn them, but recognizes their complete validity at 
the civil law. It is undoubtedly true, as Runclstein says, that ex- 
cept in America, there is no such thing as a cartel law proper ; 2 the 
laws affect cartels only incidentally. 

The tendency is certainly away from penal legislation, showing 
therein a striking contrast to recent developments in America.- In 
several countries penal laws have been abolished within the last cen- 
tury, e. g., in Germany, Austria, Belgium, and Italy. Most of the 
legislation on this subject to-day dates, however, from a period when 
combinations had not acquired the significance that they now possess. 
The only really noteworthy attempts at new legislation respecting 
industrial combinations have been made in Austria, and it is sig- 
nificant that the Austrian cartell bill of 1897-98 (cited above, p. 26) 
did not contemplate their destruction, but their recognition and sub- 
jection to governmental supervision. A somewhat different attitude, 
it is true, was taken in the recently introduced bill concerning the 
relations of the sugar-beet growers to the manufacturers. This bill 
provided that all rayon cartells, or agreements on the part of the 
manufacturers to divide the field, should be null and void, as well 
as all boycotting agreements on the part of the beet growers ; and it 
also provided penalties for those who should attempt to put such 
agreements into effect by intimidation or force. 2 This is a return in 
the policy of the Government to the principles established under the 
prevailing system of law. 

Positive conclusions with regard to the merits of these different 
systems can not be attained by analysis of the laws alone. A very 
extensive knowledge of the social and economic conditions and of 
the practical working of the laws is equally necessary, but for this 
the data obtainable are as inadequate as the subject is elusive. It is 
an easy and obvious criticism that, whether combinations are liable 
to criminal penalties, as in France, or to a declaration of nullity at 
the civil law, as in Austria, or have full validity, as in Germany, 
they flourish in all three countries. The vital question is whether 
combinations are as inimical to the public welfare in one country as 
in another, and to what extent the legal system may account for 
such differences as may exist in this respect. In this connection, also, 
it would be proper to study the powers and vigilance of the public 
administration in preventing abuses. These subjects are beyond the 
scope of the present inquiry, but proper information on these points 
might considerably alter conclusions drawn from the laws. 

According to the French law industrial combinations per se are 
not prohibited, but only combinations which commit certain acts 

1 Rundstein, op. cit., p. 36. 

2 Regiomngsvorlage, Gesetz vom * * * betreffend das Verbot der Riibenrayon- 
nirung und die Lieferung der zur Zuckererzeugung nothigen Rube, 1678 der Beilagen zu 
den stenogr. Protokollen des Abgeordnetcnbauses, XVII Session, 1903. Cf. Walker, The 
Sugar Situation in Austria, Political Science Quarterly, December, 1903, vol. xviii, pp. 
588-592. 



TRUSTS IN FOREIGN COUNTRIES. 79 

held to be injurious to the welfare of the community. 1 An indis- 
criminate prohibition, in the face of powerful economic tendencies 
supported by widespread if not general consciousness in business 
circles that these tendencies are economically necessary and defen- 
sible, fails almost entirely in achieving its purpose. It overleaps the 
bounds of justice and expediency. It condemns the loose combina- 
tion, while giving complete validity to the fusion. It condemns the 
good and the bad combination, without effectually restraining either 
of them. If the law aims to destroy monopoly, the loose combina- 
tion is no more guilty than the consolidation. Monopoly, however, 
is practically recognized and established by the State in many ways. 
It is idle, therefore, to say that monopoly is wrong and must be extir- 
pated whenever and wherever found ; monopoty is a fact which often 
exists of necessity and which the law can not destroy. The injurious 
element which has made both combination and monopoly odious is 
extortion, but this is not a necessary element of either of them. 

It is the recognition of this fact that is the great merit of the 
French law. The French penal code, in prohibiting combinations 
tending to give a commodity a price other than that which would be 
fixed by free competition, aims to check and punish extortion, and 
that is a perfectly proper matter for criminal legislation, whether it 
is considered from the standpoint of jurisprudence or of political 
economy. The form of the law is doubtless crude and antiquated, 
but it has been saved by the skillful interpretation of the courts. It 
has one great fault, namely, that it is applicable only to a combina- 
tion of persons. The evils which it seeks to punish, however, may be 
committed, and in these days of " trusts " are likely to be committed, 
by a combination of persons which the law does not recognize as 
such — by a combination which the law regards as a single person, viz, 
a corporation. Th'is danger is not so great in France as elsewhere, 
but it forms nevertheless a theoretical defect in the law. In France 
the cartell organization is preferred to the consolidation, and if the 
law can be applied, as recent cases seem to indicate, to the central 
company (comptoir, syndicat) of a cartell, this objection to a large 
extent disappears. 

In a similar manner the civil law of France recognizes the legality 
of combinations, provided their acts are not injurious to the public 
welfare according to the standard of free industry. This seems to be 
a much fairer and much wiser system than to declare them invalid 
without respect to their character or operation. Herein the French 
law, or rather the law as it is interpreted by the French courts, seems 
superior to the Austrian law as that is interpreted by the Austrian 
courts. It is true that the Austrian law declares that the agreements 
of a combination are null and void only in case they aim to raise the 
price of a commodity to the disadvantage of the public, but the courts 
have taken the position that this is a necessary result of such a com- 
bination and that the question of the actual course of prices is 
irrelevant. As the law thereby withholds its protection from all com- 
bination agreements, whether harmless or injurious, it tends to de- 
grade the former and gives an opportunity to the unscrupulous to 
repudiate their engagements. 

1 The principle of " antitrust " legislation in the United States is the prohibition of 
combinations in restraint of trade without qualification. 



80 TRUSTS IN FOREIGN COUNTRIES. 

The German law does not make this mistake. It puts a cartell 
contract on the same basis as any other contract. The good cartells 
are allowed to pursue the even tenor of their way; the bad cartells 
are subjected to the various penalties and disabilities provided for all 
persons and associations under the criminal and civil law. In this 
respect, indeed, there seems room for improvement in more complete 
protection against cartell excesses, particularly against arbitrary 
treatment in the supply of commodities and against the demand of 
extortionate prices. 1 

The prohibition of extortion through excessive prices is not to be 
confounded with the legislative regulation of prices. Legislation 
fixing a " just price " is sometimes practicable and desirable, but it is 
not adapted to many branches of industry. While legislative regula- 
tion of prices is impossible as a general remedy, it seems none the less 
certain that the crux of the whole problem is the prevention of extor- 
tionate prices and not the prohibition of combination. If the price 
extortion of a combination is not destroyed by the competition it 
excites it will not be destroyed by legislation against combination. 
It is easy to consolidate ownership. Where strong " natural mo- 
nopoly " elements exist competition is quite sure to be eliminated in 
the long run. The relief which is sought for the evils attributed to 
combinations may be obtained more eifectively by directing attention 
to prices, and the remedies available are to be found not only in the 
law but also in administration and in public enterprise. 

Francis Walker. 

Washington, D. C. 

1 Rundstein states the situation as fellows : "Inwieweit man die Praxis iibersehen 
kann, werden die Kartelle durchweg als ' gut ' und ' niitzlich ' bezeichnet : die Bezeich- 
nung ' schlecht ' wird nicbt auf das Kartell als solches, sondern auf seine Missbrauche 
und Auschreitungen angewandt ; es heisst also : Alle Kartelle sind gut und niitzlich, 
schlecht und schadlich sind nur ihre Ausschreitungen." (Op. cit, p. 65.) 



THE GERMAN STEEL SYNDICATE. 1 

By Francis Walker. 

Coal and iron are the foundations upon which national industrial 
greatness is based. Germany is preeminent in both, and in both of 
them there are powerful combinations. In the coal industry Ger- 
many takes the third rank among the nations of the world, but in 
iron and steel she is second only to the United States. In 1904 the 
pig-iron production of the four leading countries of the world was 
approximately as follows: The United States, 16,781,000; Germany 
(including Luxemburg), 10,119,000; Great Britain, 8,500,000; and 
France, 3,000,000 tons. 2 In steel production Germany has an even 
greater lead over Great Britain. The present position of Germany 
is the result of recent developments, which, though rapid, have been 
very steady. 

The two primary natural conditions for the iron industry are ore 
supply and fuel. In both of these respects Germany is richly en- 
dowed. In regard to iron-ore production Germany is only surpassed 
by the United States ; in 1904 the total output of . iron ore was 
22.047.393 tons. 3 The coal output in 1905 (excluding lignite) was 
121,190.249 tons. For iron-ore production by far the most important 
district is the "Minette," which lies in Lorraine and Luxemburg, and 
extends over their borders into France and Belgium. The next most 
important region is on the right bank of the Rhine, in the valleys of 
the Sieg, the Lahn, and the Dill. The production of ore in the other 
regions is comparatively small, the two most noteworthy regions 
being one in the Province of Hanover and the Duchy of Brunswick, 
and another in upper Silesia. There are three great coal regions in 
Germany. The greatest is that of the Dortmund or Ruhr district, 
which produces more than half of the total. The next in importance 
is upper Silesia, while the Saar is third. The coal deposits of Lor- 
raine, which are nearest to the great ore deposits of the Minette, are 
not yet developed. The nearest district of fuel supply is the Saar, 
but the coal of that region is not well adapted to the reduction of 
ores. The Minette, therefore, must be reduced by the Ruhr coal, and 
an exchange is made between the two regions, the pig-iron industry 
being about equally divided between them. The Ruhr also uses a 
good deal of ore from^the Sieg, Lahn, and Dill districts, as well as a 
large amount of foreign ore. In upper Silesia the iron ore and coal 
are found in close proximity, but the supplies of the former are too 
scanty for the industry of that region, and a large proportion has to 
be imported, especially from Austria and Hungary. The Ruhr coal 
district is not only first in the magnitude of its coal output, but also 

1 From the Quarterly Journal of Economics, Vol. XX, May, 1906. 
2 Jahrbuch f. d. Oberbergamtsbezirk Dortmund, 1901-1904, p. 747. 

3 Vierteljahrshefte zur Statistik des Deutschen Relchs, 1905, Heft IV, of which Prussia 
3,757,651 tons, Alsace-Lorraine 11,135,042 tons, and Luxemburg 6,347,771 tons. 

07S3S— 12 G 81 



82 



TRUSTS IN FOREIGN COUNTRIES. 



in the quality of the coal, which is especially adapted to the produc- 
tion of coke. In this respect neither Silesia nor the Saar can com- 
pare with it. Although the enormous iron-ore production of the 
Minette is of a low grade, its cheapness makes up for the deficiency 
in iron. The Minette ore is a brown hematite with from 35 to 40 
per cent of iron 1 and from 0.04 to 1.96 per cent of phosphorus. 2 The 
ore deposits are of great depth, and sometimes as much as 50 meters 
thick. 3 On account of its high percentage of phosphorus this ore 
was not much valued until the discovery of the Thomas process (basic 
converter). The spathic ore of Siegerland contains considerable 
manganese, and is of a high quality. 

Although Germany is a large producer of iron ore, she is also a 
large importer and exporter. In 1904 Germany imported 6,061,127 
tons of iron ore and exported 3,440,846 tons. Large quantities are 
imported for mixing with domestic ores. In the Rhenish-Westpha- 
lian district iron ore is used from over 100 different places, including 
almost all known sorts, 4 and coming from almost all parts of the 
world. The usual mixture in this region is Minette, 35 to 40 per 
cent; Swedish, 35 to 40 per cent; red hematite, 10 per cent; and 
other, 10 per cent. 5 In Silesia a typical mixture is said to be 27 per 
cent of the local ore with 21 per cent of cinder, 23 per cent of Swed- 
ish, and 25 per cent of Hungarian ore. 6 Another reason for the large 
iron-ore imports is that there are many iron furnaces far from the 
domestic regions of supply, so that the foreign ore can often be de- 
livered more cheaply. 

The distribution of the pig-iron production of Germany and Lux- 
emburg is shown in the following table : 7 



Production of pig iron, in Germany {including Luxemburg) in 1905. 
[In thousands of tons.] 



Kind. 


Rhine- 
lftnd- 
West- 
phalia, 
except 
the Saar 

and 
Sieger- 
land. 


Sieger- 
land, 
Lahn 

district, 
and 

Hessen 

Nassau. 


Silesia. 


Pome- 
rania. 


Han- 
over 
and 
Bruns- 
wick. 


Ba- 
varia, 
Wurt- 
tem- 
berg, 
and 
Thu- 
ringia. 


Saar. 


Lor- 
raine 
and 
Luxem- 
burg. 


Total. 


Foundry 


891 
263 

330 

2,8G8 
25 


177 
38 

283 
0) 
213 


94 

48 

98 
259 

362 


155 

1 


54 

77 

"""240" 


28 


83 


423 


1,906 




425 


Steel iron and other spie- 


2 
133 
14 






714 


Thomas or basic Bessemer. 


731 


2,884 
213 


7,115 

827 










Total 


4,377 


711 


861 


156 


371 


177 


814 


3,521 


10,988 







3 tons only. 



Looking first at the production of the different districts, it will be 
observed that Ehineland- Westphalia (or the Ruhr) has the largest 



i Gouvy, Etat actuel des industries du fer et de l'acier dans les provinces du Rhin et 
de la Westphalia, Paris, 1903, p. 32. „ 

2 Tiibben, Die Eisenhiittenindustrie im Oberbergamtsbezirk Dortmund und lhre Ver- 
sorgung mit Eisenerz. Mittheilungen ueber den rheinisch-westfalischen Steinkohlen- 
Bergbau. VIII Allgemeinen deutschen Bergmannstag zu Dortmund, 1901, p. 323. 

3 Krauss, Eisen-Hiitten-Kunde, I. Th. p. 21. 

4 Tiibben, p. 316. 

6 Sympher, P bie wirtschaftliche Bedeutung des Rhein-Elbe-Kanals, Berlin, 1899, p. 144. 

7 Stahl u. Eisen, Feb. 1, 1906, p. 171. 



TRUSTS IN FOREIGN COUNTRIES. 83 

production in 1905, and that Lorraine-Luxemburg (which includes 
a large part of the Minette district) is second. Together they pro- 
duce over 70 per cent of the total. Silesia and the Saar produce only 
about 8 per cent and 7 per cent, respectively. If the table be exam- 
ined with regard to the kind of iron produced, it will be observed that 
most of the iron is of Thomas or basic Bessemer steel — in 1905 over 
60 per cent — while foundry iron came second with about 17 per cent, 
and mill iron or puddled iron third, with about 8 per cent. Acid 
Bessemer steel is almost negligible to-day in Germany. The bulk 
of the Thomas steel is produced in the German Minette or in the 
Ruhr, but a not inconsiderable amount is also produced in the Saar. 
Most of the foundry iron is produced in the Ruhr and the Minette, 
particularly in the former. Silesia, which occupies a very subordi- 
nate position in other respects, is the chief producer of mill iron. The 
two leading facts are, however, the great preponderance of the Mi- 
nette and the Ruhr in the German iron industry and the predom- 
inance of Thomas or basic Bessemer steel. 

The German steel industry is quite as important in the production 
of finished products as in the raw material. The distribution of the 
manufacturing industry does not correspond very closely with the 
distribution of the blast furnaces. Bavaria, for example, has a large 
machine industry, but only a trifling output of pig iron. The Mi- 
nette, though it rivals the Ruhr in the output of pig iron, can not 
compare with it in the output of finished products. It is only re- 
cently that the Minette has begun to develop the manufacture of 
rolled products on a large scale. 1 Only about one-third of the pig 
iron produced in the Lahn and Dill Valleys is worked up there. 2 In 
Silesia, however, there is an extensive output of rolled products. 

Between the various producing regions there is naturally a lively 
competition for the German market. Especially for pig iron there 
tend to be developed certain natural regions of supply determined, in 
part, by the costs of transportation. This is distinctly the case as 
between Silesia and the western industrial regions. Silesia controls 
the supply in the far eastern Provinces, where it meets western com- 
petition only in finished products. 3 Customs duties prevent it from 
developing its sales to any great extent into Austria and Russia. 4 
For the two great western producing regions, the Ruhr and the Mi- 
nette, there does not appear to be any distinct recognized division of 
markets, although the latter region is naturally more directed to the 
export trade. 

Germany is a great consumer as w x ell as a great producer of iron 
products, and the consumption has increased rapidly with the great 
development in production, population, and wealth. In 1903 the 

1 Bosselmann, Erzbergbau u. Eisenindustrie in Lothringen-Luxemburg. Scbriften d. 
Vereins f. Social-Politik, Bd. 106, p. 4. 

- Hermann, Die gemischten Werke im dentschen Grosseisengewerbe, 1904, p. 129. 

3 Kub. Die Huttenindustrie Oberschlesiens. Scbrift. d. Ver. f. Soc.-Fol., Bd. 106, pp. 
177. 191. 

4 Verhandlunson ueber die Stahlwerksverbande. Anlage 2. p. 34. As frequent reference 
is made to the imperial cartel inquiry, the full titles of the various cartel investigations 
cited are here given, with short titles for reference. The Siemenroth edition is 
used except for the Stahlwerksverband. The general title is Kontradiktorische Verhand- 
lnnffpn ueber deutsche Kartelle. The particular investigations referred to are : Ver- 
handlungen ueber die rheinisch-westfalischen Roheisenssyndikat (Enquete, V) ; Verhand- 
lutisen ueber den Halbzeug-Verband (Enquete, VI) : Verhandlungen ueber den Verband 
deutscher Drahtwalzwerke (Enquete, VIII) ; Verhandlungen ueber den Weissblechverband 
(Enquete, IX) ; Verhandlungen ueber den Stahlwerksyerband, Beilage z. deutschen Reichs- 
anzeiger, Aug. 18, 1905 (Enquete, S. V). 



84 TRUSTS IN" FOREIGN COUNTRIES. 

total consumption was greater than in England, although it was 
much below that of the United States. Reckoned, however, accord- 
ing to population, the consumption of England was greater than that 
of Germany. 1 The total consumption depends not only on the pro- 
duction, but also on the movement of imports and exports. Germany 
is both an importer and exporter of iron products. The movement 
for 1904 is shown in the following table : 2 



Imports. 



Exports 



Pig iron and half products . 
Iron manufactures 



Tons. 
240,233 
101,492 



Tons. 
701. 985 
2,022.01 



The chief imports were pig iron, scrap iron, steel bars, iron for 
plowshares, and tin plate. The chief exports were pig iron, half 
products, beams and girders, rails, steel bars, sheet bars and sheets, 
rods, coarse iron wares, etc. The principal foreign markets for Ger- 
man half products in 1904 were England and Belgium. More than 
half of the total was destined to England. 3 The exports of rails 
from Germany, on the other hand, were widely distributed, though 
England again was the chief market. England was also the chief 
purchaser for beams and girders. In regard to the official export 
statistics a great difficulty always exists on account of the fact that 
the given country of destination is not the country of final destination 
or consumption. The exports to Holland and Belgium are, in large 
part, really destined for England. 

Although the German iron industry is extremely formidable in 
international competition, it undoubtedly finds a good deal of its 
strength in the existence of an effective protective tariff, which secures 
the home market and enables it to dump its surplus products in the 
world markets. The protection established for the iron trade has 
a vital relation to the existence of the various iron and steel combina- 
tions. Before the present protective policy for the iron trade was 
inaugurated, the production lagged far behind the consumption. 4 
In 1878 a special committee of inquiry was appointed to investigate 
the subject, which almost unanimously agreed that protection for the 
iron industry was necessary, and this conclusion was followed by a 
law (1879) which imposed duties higher than those recommended, 
which remained in effect without substantial change down to the 
recent recasting of the tariff (to go into effect Mar. 1, 1906). The 
duties on an ad valorem basis, both in the old and in the new 
schedules, amount to about 15 per cent on pig iron, 20 per cent on 
rails, 16 per cent on sheets, and 9 per cent on rods. 5 

There are a number of large iron and steel concerns in Germany 
which combine with the manufacture of steel the production of the 
raw materials — iron, ore, coal, and coke. But the individual concern 
has ceased to be the unit in German industry to a large extent. The 

1 Martin, Die Eisenindustrie in ihren Kampf um den Absatzmarkt, Leipzig, 1904, p. 52. 

2 Jahrb. f. d. O. Dortmund, 1901-1904, p. 734. 

s Enquete, S. V., Anlage 7. 

* Heymann, p. 137. 

B Voelcker, " L'Etat actuel de l'industrie siderugique allemande et sa organisation." 
Revue gconomique internationale, D€c, 1904, p. 734. Cf. Der deutsche Zolltarif vom 25 
Dezember, 1902, mit dem auf den Handelsvertragen des Deutschen Reichs * * * 
beruhenden Bestimmungen, Berlin, 1905. 



TRUSTS IN FOREIGN COUNTRIES. 85 

modern unit is the cartel. The most important matters of commer- 
cial and economic policy are determined to-day by these combinations. 

Combinations in the "German iron industry are of ancient date, and 
have assumed forms adapted to the contemporary economic organi- 
zation. 1 The distinction between the early methods of combination 
and the modern system lies not only in the more comprehensive char- 
acter of the latter, but also in the fact that the modern iron industry 
is established on a stupendous scale, and operates for the world mar- 
ket. It is often stated that the first German cartel was the tin-plate 
combination, which was formed in 1862 ; 2 but this was not the first 
cartel even in the iron trade. Rail pools existed over 50 years ago. 3 
It was not until the seventies, however, that they acquired much im- 
portance. There was an overdevelopment of the iron industry at the 
beginning of that decade, and during the following depression the 
producers resorted to combinations to restrict their output and to 
maintain prices. The early cartels were generally quite limited as 
respects the commodities and the region included in the agreement. 
The first important exception to this (apart from rail pools) was 
the combination of German rolling mills, which originated in 1886 
in Silesia and expanded to include the whole country. It exercised 
a very marked influence over the German iron trade down to its dis- 
solution in 1893, in the face of new competition. 4 The heads of this 
combination, Caro, declared at the time that it failed because a cartel 
of rolled products could not stand alone; it was necessary to cartel 
the raw materials and the finished products also. At that time, how- 
ever, the producers of raw materials — coal and pig iron — had not 
been able to extricate themselves from the position into which their 
previous overdevelopment had brought them. They were also facing 
a constant decline in prices, owing to rapid reductions in the cost of 
production due to technical improvements. 5 The rolling mills and 
the manufacturers of finer wares were in a relatively favorable situa- 
tion. They often got their raw material under cost. 6 The large 
mixed works, or those which combined the production of raw ma- 
terials with the manufacture of commercial products, complained of 
the disadvantage at which they were placed as compared with the 
straight rolling mills (reine Walzwerke). 7 There was no advantage 
at that time for a rolling mill to acquire coal mines or to establish 
blast furnaces, and hence the policy of combining the various stages 
of production, which had been quite conspicuous at an earlier period 
in the Ruhr district, did not find frequent illustration at this time. 

Fundamental changes appear in the general conditions of the 
industry at the beginning of the nineties. A tolerably successful 
pig-iron cartel had been established in the Ruhr in 1886, 8 but it was 
not until the coke s} r ndicate was accomplished in 1890 that a secure 
basis was formed. The iron industry was still in a weak position. 
In 1892 the pig-iron producers of the Ruhr and the Minette got 

1 Cf. Heymann. pp. 56, 59, 60, 96. 135, 136, etc. 

2 Grossmann, Ueber industrielle Kartelle, Jahrb. f. Gesetzg., Jahrg. 1891, p. 243. 

3 Kollmann, Der deutsche Stahlwerksverband, Berlin, 1905, p. 6. 

4 Cf. Caro, Der deutsche Walzwerksverband, Schriften d. Vereins f. Soc.-Pol., Bd. 60, 
Pfl. 43 et seq. 

5 Cf. Kestner, Die deutscheo Eisenzolle, 1902, p. 13. 

6 Vogelstein, Die rheinisch-westfiilische Montan- u. Eisenindustrie, Schriften d. Vereins, 
f. Soc.-Pol., Bd. 106, pp. 81-83. 

7 Heymann. p. 149. 
"Grossmann, pp. 240-241. 



86 TRUSTS IN FOREIGN COUNTRIES. 

together, while a pig-iron cartel was formed in Siegerland two years 
later. 1 The ore production in Siegerland was combined in the same 
year. 2 In the Minette the ore was almost entirely controlled by the 
blast furnaces. 3 More important than all of these was the forma- 
tion of the coal syndicate in 1893. 4 This powerful combination 
dominated the whole industry during the ensuing decade. Thus 
the foundations were laid for a new regime in the iron trade, in 
which those who controlled the raw materials were to have a great 
advantage. The days of cutthroat competition between mining com- 
panies, in which the iron manufacturer could speculate on the 
demand for finished products with the assurance that the raw mate- 
rial would be abundant and cheap, were over. The new fuel cartels 
were founded on the principle of monopoly control, and the pig-iron 
cartels partook, to some extent, of that character also. The combi- 
nations among the manufacturers of iron products did not keep 
pace with these developments among the producers of raw materials. 
The cartel of German rolling mills was dissolved in 1893, and no 
general combination appeared to take its place. The rail pool seems 
to have maintained a continuous existence, but the beam pool was 
dissolved about 1892, though reorganized shortly after. 5 

In 1894-95 a marked improvement appeared in the commercial 
situation in general and in the iron trade in particular which lasted 
until 1900. Although some of the earlier cartels may have been 
" Kinder der Noth," the period of prosperity furnished apparently a 
healthful environment for growth. 

The most important event of this period was the establishment of 
a half-products cartel. This innovation was a consequence of new 
technical conditions, and particularly the development of great steel 
mills for the production of Thomas or basic steel. The characteristic 
products of these steel mills are rails, beams, and hall' products 
(ingots, billets, sheet bars, etc.) The half products are the raw 
material of the rolling mills. The large steel works found that the 
straight rolling mills were not keeping pace with their development, 
and that it was safer, as well as more profitable, to work up their 
own crude steel to a large extent. They were generally mixed 
works, controlling their own supplies of fuel, ore, and pig iron. 
These works formed the half -products syndicate (Halbzeugver- 
band), and this cartel, combined with the rail and beam pools, 
was the immediate forerunner of the present steel syndicate. At 
first, however, they had a price agreement simply, and it Avas some- 
what later (1899) that the sale of half products was syndicated. 6 
This cartel soon included all the great steel works of western Ger- 
many. The works supplied the straight rolling mills with their 
raw material, and at the same time competed with them in the manu- 
facture and sale of rolled products. This put the rolling mills in a 
dangerous position, because, technically, they were no match for the 
great steel works. In 1897 a comprehensive but complicated cartel 
was established between the pig-iron producers of the Ruhr, the 
Minette, and Siegerland. 7 In the period between 1895 and 1904 

1 Heymann, pp. 72, 152. 

- s.iyous, La crlse allemande, p. 116. 

3 Bosselmann. p. 15. 

*Cf. Walker, Monopolistic Combinations in the German Coal Industry, New York, 1904. 
B Hermann, p. 163; Kollmann, pp. 7, 8. 

8 Cf. Voelcker, Bericht ueber das Kartellwesen in der inldndiscben Eisenindustrie, Ber- 
lin. 1903, p. 52. Cf. A. Kirdorf, Enquete, VI, n. 410 ; Kollmann, p. 7. 
7 Heymann, p. 153 ; Voelcker, Bericht, pp. 30-37. 



TRUSTS IX FOREIGN COUNTRIES. 87 

the principal cartels established for rolled products were as follows: 
Heavy sheets 1 and rods 2 in 1897, wire nails in 1898, 3 and light sheets 
in 1902. 4 The rolling mills failed, however, to cartel steel bars. In 
Silesia rolled products were effectively cartelled ever since 1887, in 
one form or another. 5 These cartels do not comprise, by any means, 
all of those found in the steel industry during this period, but were 
the most important connected with the development of organization 
in the steel trade. 

The development of cartels in various steel products called forth 
protective organizations among the consumers. An important organ- 
ization of this sort was the Bhenish-Westphalian Purchase Associa- 
tion for pig iron, which was established in 1901. 7 More important 
than this was the association for the protection of the interests of the 
consumers of half-products which was formed in 1902. This included 
42 concerns, mostly straight rolling mills, with a demand (in 1903) 
for 560.000 tons. 8 There were numerous other purchasing combina- 
tions, especially during the recent crisis. 

The reasons for the formation of the steel syndicate, according to 
an official statement made to the Government, were substantially as 
follows: The discovery of the Thomas or basic process had made 
practicable the utilization of the immense deposits of phosphoric ore 
in the Minette district, and had given rise to a number of large steel 
works adapted to that purpose. This, in turn, had induced the exist- 
ing steel works to modernize and enlarge their plants, which caused 
an overproduction of steel, and imposed upon the steel works the 
necessity of combining to restrict their output. The earlier efforts 
in the way of price agreements proved ineffectual, and made necessary 
the establishment of stronger combinations. Strong cartels thus 
established in various steel products proved defective also, because 
they lacked control over the export trade, as well as a comprehensive 
oversight of the market. The steel syndicate 'W as formed, therefore, 
with the intention of bringing about a harmonious action in all lines 
of steel production. The first step was to secure an effective combina- 
tion of the heavy rolled products (half-products, rails, and structural 
steel), and these products could be more easily brought into a com- 
bination because they were made to a great extent by a limited num- 
ber of large mixed works, which had a certain economic likeness. 
The next step was to bring about a cartel for the light-rolled 
products. This, however, had not gone beyond a determination of 
quotas, and awaited an agreement with the outside straight rolling 
mills and the Siemens-Martin (open hearth) steel mills before it 
could be firmly established. 9 

The project for the steel syndicate was first broached in a practical 
sense in the autumn of 1902. The chief spirit in the movement was 
Adolf Kirdorf, the head of the half-products syndicate. After pre- 
liminary preparations a meeting was held in February, 1903, which 
chose a commission to work up a plan. This plan came up for ac- 

1 Kestner, pp. 55, 56. 

2 Lnquele-, VIII, pp. 696, 697. 

3 Ibid., p. 711. 

* Statistik d. Oberschles. Berg- u. Hiittenwerke, 1902, p. 80. 

5 Enquete, S. V., Anlage 2. 

6 Cf. Voelcker, Bericht, p. 73 et seq. ; Enouete, VI, pp. 375, 376; Deutsche Industrie- 
Zeitung, 1903. p. 141. 

7 Encmete. V, pp. 353, 354. 

8 Ibid., VI, p. 401. 
•Enquete, S. V., Anlage 5. 



88 



TEUSTS IN FOREIGN COUNTRIES. 



ceptance in the autumn of the same year. There were the usual 
protracted negotiations, but finally all of those works whose adhesion 
was regarded as vital were secured by various compromises and con- 
cessions, except Krupp, Phoenix, and Westfaelische Stahlwerke. The 
agreement was ratified, nevertheless, on March 1, 1904, and almost 
immediately after Krupp joined in consideration of an enlarged 
quota. It was deemed essential, however, that Phoenix should enter 
the combination, and the newly formed syndicate applied all its 
commercial and financial influence, especially with the coal syndicate 
and the banks, to achieve its purpose, treating it as a " scab " concern. 
The management of Phoenix refused to join because they regarded 
the quota allotted to them as insufficient. The syndicate soon suc- 
ceeded, chiefly through the influence of the great banks, in getting 
the shareholders of Phoenix to reverse the policy of the management. 
The vigorous and drastic measures which the syndicate took to ac- 
complish its purpose excited a good deal of unfavorable criticism, 
but Phoenix has accepted the situation with a tolerably good grace. 1 
As a matter of fact, its profits have shown a large increase. 2 

The Stahlvv erksverband went into effect on March 1, 1901. It was 
concluded for a term ending on June 30, 1907; and in case there is 
no written objection to its continuance by anv member before De- 
cember 31, 1906, it is to stand until June 30, 1912. The character of 
this agreement, in respect to matters of general interest, is substan- 
tially as follows : 3 

The steelworks owners in the combination have an agreement 
whereby they obligate themselves to sell certain products to their 
central company, which is called the Stahlwerksverband. They 
agree further to meet in a general assembly to perform certain duties 
imposed by the agreement on that body, and also to submit to the 
directions of certain organs provided for in the agreement. The 
Stahlwerksverband, or central company, has on its part an agree- 
ment with the steelworks owners to purchase all of their products of 
the kinds specified, and to sell them again under the terms fixed by 
the agreement. The assembly of the steelworks owners elects an 
advisory council (Beirat), a body called the commission, and several 
subordinate commissions. The Stahlwerksverband has the usual 
statutory organs of a company; namely, supervisory council, man- 
aging directors (Vorstand), and general assembly. In the assembly 
of steelworks owners each member has 1 vote for every 10,000 tons 
quota of production. Some of the chief powers of this body are : 
(1) Election of Beirat and commission, (2) admission of new mem- 
bers, (3) determination of eventual restriction of quotas, (4) assent 
to sales or leases of plants by owners, (5) determination of penalties, 
(6) dissolution of agreement in case of reappearance of competition, 
and (7) provision for the inclusion of light-rolled products (B prod- 
ucts) in syndicate sales. The Beirat is composed of members elected 
by the steelworks owners, each owner or group of owners having the 
right to elect one member for every 500,000 tons of quotas. The 
members of the Beirat must be chosen from the general assembly. 
The chief powers of the Beirat are : (1) Holding members of the com- 
oination to their agreement, (2) provision of rules regarding selling 



1 Cf. Geschaefts-Bericht Phoenix, 1903-4. 

2 Liefmann, Zur heutigen Lage der deutschen Grosseisenindustrie, Conrad's Jahrbuecker, 
Nov., 1905. 

8 This statement is based on the text of the agreement and a condensed exposition 
thereof submitted to the Government by the steel syndicate. Cf. Enquete, S. V., Anlage 5. 



TRUSTS IN FOREIGN COUNTRIES. 89 

prices and terms of sale, (3) determination of increase of quotas for 
B products (see below), (4) determination of prices to be paid the 
steelworks owners, (5) disposition of reserves, (6) imposition of 
penalties, and (7) authorization to Vorstand to conclude agreements 
with competitors, etc. The third organ of the cartel is the commis- 
sion, which is composed of eight members, and which has the follow- 
ing powers: (1) Classification of commodities, and (2) determina- 
tion of " scale prices," comparative weights, and compensation for 
unusual specifications. Among the subordinate commissions the 
freight commission may be specially mentioned. 

The selling company is called the " Stahlwerksverband, Aktien- 
gesellschaft." It is located in Dusseldorf. The purpose of the 
company, as described in the by-laws, includes not only the purchase 
and sale of iron and steel products of all kinds, but also the acqui- 
sition and operation of all kinds of enterprises which are connected 
with the storage and transportation of iron and steel products. This 
company has a share capital of 400,000 marks in registered shares, 
which are not transferable without the consent of the general assem- 
bly. This capital is nominal in amount, because the company, 
although it does an enormous business, 1 is, in effect, only an agent 
of the steelworks owners, and sells for cash. The managing directors, 
or the Vorstand, conduct the business of the company, which has a 
very large and highly organized bureau. There is one department 
for accounting, statistics, taxation, freights, legal work, and for 
dealing with the public authorities, and a department for the sale 
of each of the three kinds of heavy rolled products. 

The commodities covered by the agreement are specifically de- 
scribed. They include (1) the production of crude steel and forge 
iron; (2) the purchases of the same, and also of rolled half products 
and products enumerated under the two following specifications; 
(3) the production of half products, railway material, and structural 
steel; (4) the production of bars, rods, heavy and light sheets, tubes, 
railway axles, wheels and tires, forge pieces, cast-steel pieces, etc.. 
so far as not made from material under 3 and 4, but directly from 
crude steel; and (5) the purchase from steelworks owners of com- 
modities enumerated under 3. if they are for the plants of the steel- 
works owners and if the products thereof are sold by the cartel. 
The products enumerated under 1 and 3 are called A products and 
those under 4 are called B products. The Stahlwerksverband buys 
from the steelworks owners all the products which are offered for 
sale under the group A products and sells the same for the general 
account. For B products, on the other hand, the amount of produc- 
tion is fixed, but the sale is left to the steelworks owners individually 
or to such other cartels as they may belong to. 

The quotas of the steelworks owners for the A products sold by 
the Stahlwerksverband are based on the amount of crude steel origi- 
nally allotted to each by the agreement. This is called the principal 
quota and is divided into three "group quotas," namely, (1) crude 
steel and half products for direct sale, (2) railway material, and 
(3) structural steel. The group quotas are given in crude steel 
equivalents. It is the duty of the selling company to distribute the 
orders so that each concern shall have its share according to its 
quotas. There are various particular provisions in this connection. 

1 The sales in the first year, which did not comprise the whole output, were about 
$62,000,000. Cf. Iron and Coal Trades Review, Sept. 15, 1905. 



90 TRUSTS IN FOREIGN COUNTRIES. 

If the total of the quotas is increased, they must all be increased in 
proportion, but if any concern is unable to maintain the increased 
output allotted to it the works which produce the excess are required 
to pay those which produce less a contribution of 5 marks per ton. 
Certain exchanges in quotas between different plants are allowed, 
with the consent of the Vorstand, and it is also provided that the 
Vorstand can make arrangements whereby certain works shall receive 
the bulk of orders for unusual specifications. Both these provisions 
aim at a greater economy of production by a division of labor. 
Each steelworks owner must fulfill orders allotted him, but in case 
they involve changes in his equipment compensation must be made. 
Where a concern uses its own products the Stahlwerksverband does 
not intervene as a buyer or seller. 

The selling prices are fixed by the Vorstand under the guidance 
of rules laid down by the Beirat. The steelworks owners receive a 
minimum price (table price) originally, and afterwards what excess 
remains from the actual proceeds after deduction of the various ex- 
penses of administration, reserve, rebates, etc., incurred by the selling 
company. It is evident that the only way open for any particular 
concern to increase its profits is to reduce its costs of production. 
The table prices are for Thomas or basic Bessemer steel. Extra 
prices are allowed for commodities of superior grade, based on the 
extra proceeds of sale. A particular concern may receive higher 
prices than others if it is clear that its product commands a higher 
price in the market on account of quality. Important features of the 
price regulation are the freight-basing points. In the domestic 
trade the rules are as follows : For half products there are five bases, 
and the purchaser is quoted a price from the base nearest to his 
works; for railway material the base is the producing concern; for 
structural steel the base is Diedenhofen. In the foreign trade the 
basing point is the plant most favorably located for the purchaser. 
These rules represent partly compromises between different interests 
in the combination and partly attempts to economize freight charges. 
For the foreign trade, for example, each concern has the advantage 
or disadvantage resulting from its geographical situation with re- 
gard to the destination. In domestic railway material, on the other 
hand, geographical situation has no effect. Export bounties which 
are received from other cartels (e. g., coal syndicate or pig-iron 
syndicate) are distributed in such a manner that the steelworks 
owners who make the commodities for which export bounties are re- 
ceived get their share thereof, whether their products are exported 
or not. 

For the B products the principal quota is the weight of crude steel 
required to make them. This is fixed for each concern in the original 
agreement. A concern can reduce its sale of B products at will. 
On the other hand, it can not increase its sales without leave from 
the Beirat. If a concern sells more than its allotted quota, it must 
pay 20 marks per ton for such excess sales. 

The agreement provides for a " reserve," which is intended prin- 
cipally for the promotion of the export trade or for fighting com- 
petitors. It is acquired by deductions made from the proceeds of 
sale on the basis of the table prices. This assessment is fixed by 
the assembly of steelworks OAvners, with the limitation that it can not 
exceed 3 per cent of the sums paid under the table price payments. 
The steelworks owners are prohibited from selling or leasing their 



TRUSTS IN FOREIGN COUNTRIES. 



91 



plants without the consent of the assembly of steelworks owners, but 
this assent must be given if proper guaranties are provided for the 
fulfillment of cartel obligations. On the other hand, the steelworks 
owners are forbidden to buy or operate any outside plant that makes 
A or B products or to erect new plants for the production of those 
commodities. The Vorstand has the right to supervise all concerns, 
and to inspect plants, books, and papers, in order to insure due per- 
formance of obligations. Detailed provisions are made regarding 
fines and penalties. An arbitration court is established also, which 
(to the exclusion of the courts of law) has jurisdiction over disputes 
concerning the obligations of the parties to the agreement. In case 
new competition appears during the term of the cartel with a pro- 
duction amounting to 5 per cent of the cartel in A or B products, 
according to the opinion of the Beirat, the agreement m.?ij be can- 
celed. 

The original quotas of the members of the Stahlwerksverband for 
different products are shown in the following table : 

Quotas in the StaliUcerksverband. 
[From Jahrbueh fur den Oberbergamtsbezirk Dortmund, 1901-1904.] 





A products. 


B products. 




Company. 


Total. 


Half 

prod- 
ucts. 


Rail- 
road 
mate- 
rial. 


Struct- 
ural 
steel. 


Total. 


Bars, 

etc. 


Rods. 


Plates 

and 

sheets. 


Tubes. 


Rail- 
road 
axles, 
etc. 


Grand 
total. 


Deutscher Kaiser, Thvssen 
& Co 


285 

1 140 

24S 
234 
250 
202 
341 
251 
214 
229 
152 
143 
73 
194 

192 
172 
165 

210 
149 

191 
91 

109 
25 
40 
62 
23 

166 
25 
24 

15 


50 

(InB) 

65 
90 
122 
49 
217 
111 
77 
59 
38 
55 
18 
10 

37 
25 
15 

128 
71 

111 
61 
17 

7 

•*(V)""' 

6 
50 




133 
85 

53 
144 

63 
110 

4S 
100 

49 
114 

63 

87 

52 

OO 

50 
62 
5 

07 
23 

40 
30 

54 

"'""27" 

61 

81 

116 
5 

24 

5 


102 

55 

131 

""65" 
43 
76 
40 
88 
56 
51 

41 

2 

129 

105 
85 
145 

55 
55 

40 

""38' 
17 
14 

------- 

""26" 
10 


419 

335 

212 
222 
175 
206 
38 
134 
119 
104 
169 

99 

101 
121 

88 

30 

70 

20 
97 
55 
76 
60 
14 
47 
350 
»50 
24 


253 
244 

129 
50 
55 
74 
38 
66 

101 
90 

102 

15 
84 

75 
95 
76 

30 
30 

20 


29 

24 
7 

"'34' 


93 

80 

58 
40 
103 
76 


43 

31 

3" 


13 
10 

( 2 ) 

122 
17 
22 

( 3 ) 

13 

1 

14 

6 


704 


Kbnigs u. Laurahutte 

Oberschlesische Friedens- 
hutte 


475 


De Wendel & Co 


460 


Fried. Krupp 


456 
425 


Gutehoffnungshiitte 

Rombacher Hiittenwerke. . . 


408 
379 


Rheinische Stalilwerke 

Aachener Hutten Akt. V 


...... 


54 




378 
333 








323 


Eisenu. Stahhverk Hoesch. . 


20 


41 




321 


Ges. f. Stahlindustrie 

Burbaeher Hiitte 


306 


15 

26 
26 






293 


Rochlingsche Werke, Volk- 








293 








( 5 ) 


293 


IYiner Walzwerk 






253 


Lothringer Huttenverein, 










240 




40 









219 


Eisenliiitten Verein, Dudel- 
ingen 


211 






88 
12 




9 


188 


Maximilianshutte 


33 

41 

60 

2 

28 

120 

9 50 

19 


"35" 

23 


164 


Hasper Eisen u. Stahhverk. . 






101 


Eisenwerk Kraemer 






( 6 ) 
12 
19 
21 


94 


Georgs-Marien- Verein 






75 


Van dcr Zypen 

Phonix... 

Kattowitzer A. G . . . 








70 


140 


70 




416 
75 


Sachsische Gusstahll 








5 


48 


Huldschinsky'sclie Hut i- 
werke " 








15 


















Total 


4,614 


1,490 


1,685 


1,438 


3,522 


1.976 


435 


715 


77 


349 


8,012 



12,500. 2 400. »200. <1,100. & 161. MOO. » 300. 8 1,200. 9 That is, up to 50. 

Note.— The figures in this table are given in thousands of metric tons to the nearest thousand, but for 
small quotas this does not indicate ,hem with sufficient accuracy. For the small quotas thus affected the 
precise figures for the corresponding numbered references are: 

The addition of the column for tubes does not check, which is presumably due to a typographical error 
in the authority quoted. 



92 TRUSTS IN FOREIGN COUNTRIES. 

In addition to the quotas given above, certain concerns have the 
privilege of purchasing a fixed amount of steel. The only important 
allowance is that of Phoenix, which amounts to 100,000 tons. Besides 
this certain other works are to receive in the future certain additions 
to their quotas. Here, again, there is only one case in which a con- 
siderable increase is provided for; namety, Krupp, which by April, 
1907, will be allowed 706,000 tons for its total quota. 1 Taking the 
total quotas, the geographical distribution is as follows: For the 
Rhenish-Westphalian works, 54 per cent; for the works in the Saar, 
Lorraine, and Luxemburg, 32 per cent; for upper Silesia, 7 per cent; 
and the remainder (7 per cent) in various parts of Germany. 2 

The proportion of the production of the Stahlwerksverband to the 
total production of Germany is estimated at about 90 per cent. 3 All 
the important steel works which were deemed to come within the 
scheme of organization except one — the Westfalische Stahlwerke — 
are included in the agreement. Several works have been added since 
then. There does not seem to be any immediate likelihood of new 
competition appearing. To start a new first-class steel works with 
an independent supply of coal and coke would cost, it is said, 
50,000,000 marks. 4 Voelcker says, " The German Stahlwerksverband 
represents for the cartels in the iron industry, not the keystone of the 
arch, but rather the foundation of a new grouping." 5 The chief pur- 
poses of the cartel are officially stated to be (1) the maintenance of 
the domestic market, (2) the full occupation of the works, (3) the 
simplification of working programs of the works, and (4) the elimi- 
nation of competition among German works in foreign markets. 6 
Adolf kirdorf was elected as the first head of the syndicate. 7 

It is difficult to estimate the capital value of the concerns in the 
steel syndicate. They include, of course, besides, steel mills, coal 
mines, coke works, blast furnaces, etc. If the share capital at the 
market quotation is taken, and to this is added the outstanding funded 
debt, a fairly representative figure is obtained. On this basis, using 
figures chiefly for 1904, the following computation has been made 
from data in the Dortmunder Jahrbuch and Saling's Boersenpapiere. 
For 20 concerns in the syndicate, embracing 63 per cent of the total 
quotas for A and B products, the total capital value is computed to 
be about 958,270,000 marks. If the same proportion be applied to 
the aggregate quotas of the syndicated concerns, the total capital 
value would amount to 1,521,000,000 marks, or about $362,000,000. 8 

The steel syndicate aimed at a national organization of the industry, 
and several concerns in upper Silesia were included in the combina- 
tion. The steel producers of that region, however, went further, and 
established a local organization, which in some respects was more 
complete than the steel syndicate. The distance of upper Silesia 
from accessible markets makes it necessary for the steel works to 
manufacture the finer products which pay better for distant ship- 

1 Jahrb. f. d. O. Dortmund, 1901-1904, pp. 720, 721. 

2 Ibid., p. 722. 

3 Voelcker, " L'Etat actuel de l'industrie siderugique allemande et sa organisation," 
Revue <5conomique internationale, D<5cembre, 1904, p. 742. 

*Enquete, S. V., p. 16. 

5 Voelcker, Revue 6con., D6cembre, 1904, p. 744. 

6 Enquete, S. V., p. 37. 

7 Stahl u. Eisen, 1904, p. 331. 

8 Jutzi, taking the par value of the capital stock, the reserves, and the bonded debts, 
estimates the total capital invested at 1,031,500,000 to 1,041,500,000 marks. Die deutsche 
Montanindustrie auf dem Wege zum Trust, Jena, 1905, p. 31. 



TRUSTS IN FOREIGN COUNTRIES. 93 

ment. The German rolling-mill cartel, which was dissolved in the 
early nineties, left behind it in Silesia a local cartel which included 
all but one concern, and this organization lasted down to the end of 
1904. It was, however, inadequate, and hence some of the Silesian 
works joined the steel syndicate. This led to the organization of a 
local steel combination x on December 16, 1904, which went into effect 
at the beginning of 1905. This was called the Oberschlesische Stahl- 
werksverband G. m. b. H. 2 It includes the eight steel works of upper 
Silesia, one in Berlin, and one in Danzig. The term of the agreement 
is fixed from January 1, 1905, to June 30, 1907, although an earlier 
dissolution was possible under certain contingencies. The agreement 
in its general form is modeled on that of the greater steel syndicate, 
but it differs in one very important particular. As there is little of 
crude steel or heavy-rolled products made for sale, these are not syn- 
dicated, but the light-rolled products are carteled instead. Some of 
these, light -rolled products are sold by the syndicate, but the others 
are simply regulated as to output. 3 There were some difficulties in 
the beginning which threatened to break it up, but these were settled, 4 
and soon after the five remaining steel works in upper Silesia became 
members of the larger or kW German ■' steel syndicate. 5 

One of the characteristic developments of industrial combinations 
has been the suppression of the middlemen. The steel syndicate fur- 
nishes some striking illustrations of this fact. Before the formation 
of the syndicate the dealers in structural steel had been organized in 
five groups by the beam syndicate, 6 and these groups were recognized 
by the steel syndicate after it was established. The members of these 
groups of dealers agree to sell according to certain mimimum prices 
and conditions, and each group has a distinct territory. Similar 
organizations have been formed in Switzerland, Denmark, Sweden, 
and Norway. 7 The steel syndicate declares that its special purpose in 
promoting and recognizing them has been to obtain a better view of 
the market and to exercise a greater control over it. 8 The dealers 
have submitted to the inevitable with what grace they could, but they 
complain that the profit (a commission practically) is too small. 9 
For the other products, which the syndicate sells directly (half prod- 
ucts and railway material), the conditions of trade are different; 
i. e., they are both sold direct to the consumers in the domestic market 
and also to some extent abroad. In the most important foreign 
market of the syndicate (London) the former agents of the various 
companies have been organized into a limited liability company, over 
which the syndicate has taken pains to secure complete control, both 
of personnel and stockholders. 10 Similar agencies have been estab- 
lished to represent the syndicate in Amsterdam and at Brussels. 
Further, in order to get a better view of the English market, the syn- 
dicate has stopped selling f. o. b. 11 continental ports and sells instead 

1 Cf. Enquete, S. V., Anlage 4. 

2 G. m. b. H. is the abbreviation for " company with limited liability." 

3 Enquete, S. V., Anlage 2 ; Deutsche Industrie-Zeitung, Dec. 30, 1904, p. 475. 
*Cf. Kartell-Rundschau, 1905, pp. 270, 374, 428. 

5 Ibid., p. 490. 

6 Deutsche Industrie-Zeitung, Jan. 22, 1904, p. 34. 

7 Enquete, S. V., Anlage 5, p. 44 ; Deutsche Industrie-Zeitung, June 17, 1904, pp. 
226, 227. 

8 Enquete, S. V., Anlage 5, p. 44. 

9 Ibid., p. 22. 

10 Deutsche Industrie-Zeitung, May 27, 1904, p. 198 ; Kartell-Rundschan, 1904, p. 532. 

11 " Free on board " at port of shipment. 



94 



TKUSTS IN FOREIGN COUNTKIES. 



c. i. f. English ports. 1 The syndicate has even introduced sales with 
delivery at works to the English consumer. 2 

It would be difficult to appreciate properly the policy of the steel 
syndicate, especially on account of the brief term of its existence, 
without some reference to the previous movement of production and 
prices. Before speaking, however, of any particular feature it is 
desirable to note a few of the leading facts regarding the steel market 
in recent years. The period since 1895 may be approximately de- 
scribed as follows : From 1895 to 1900 there was a great boom, which 
culminated in a short period of high prices in 1899-1900, and termi- 
nated in a crisis in the latter year, which brought on a general and 
very serious collapse. A period of depression followed, which may 
be said to cover the years 1901 to 1902. 3 During 1903 improvement 
was evident, and since then the steel trade has been active, if not, 
generally speaking, remarkably profitable. The last half of 1905 has 
brought an extraordinary revival of activity. 

The raw-material cartels had established themselves at the begin- 
ning of the period and occupied a favorable position throughout. 
The cartels which existed in finished products were generally more 
loosely formed, and their policy, both in production and prices, was 
less conservative. When the depression came they were in a weak 
position and were more eager to form combinations- The raw- 
material cartels had, however, the advantage and succeeded in shift- 
ing the greater part of the losses occasioned by the hard times onto 
the manufacturing branches. The former were able, that is, to 
maintain their prices to a large extent, while the latter had to reduce 
theirs and to accept greatly diminished margins. The general policy 
of all producers was to keep up their production and to sell abroad 
at any cost what they could not find a market for at home. The fol- 
lowing table shows the movement of production in some leading 
lines : 



Production of pig iron and certain iron manufactures in the German Customs 

Union, 1895-190J,. 

[In thousands of tons.] 



Year. 


(1) 

Pig 
iron. 


(2) 

Cast-iron 
wares, sec- 
ond cast- 
ing." 


(3) 
Half prod- 
ucts (from 
converter 
or Siemens- 
Martin) 
for sale. 


(4) 
Rails. 


(5) 
Finished 
products 
(from con- 
verter or 
Siemens- 
Martin). 


(6) 

Wire rods 
(from con- 
verter or 
Siemens- 
Martin). 


(7) 

Tin 
plate. 


1895 


5,465 
6,373 
6,881 
7,313 
8,143 
8,521 
7,880 
8,530 
10, 018 
10,058 


1,146 
1,355 
1,440 
1,573 
5 1,758 
1,785 
1,503 
1,506 
1,704 
1,987 


1,132 
1,358 
1,273 
1,428 
1,508 
1,536 
1,648 
2,230 
2,412 
7 2, 374 


495 
583 
799 
819 
808 
922 
849 
945 
1,080 


2,830 
3,462 
3,863 
4,353 
4,820 
4,757 
4,486 
5,101 
6 5,802 
5,976 


502 
549 
513 
476 
512 
457 
523 
574 


31 


1896 


34 


1897 


31 


1898 


36 


1899 


34 


1900 


31 


1901 


36 


1902 


42 


1903 


45 


1904 




48 









1 " Cost, insurance, and freight ; " i. e., price delivered at port of destination. 

2 Enquete, S. V., Anlage 5, p. 43. 

3 Cf. Walker, pp. 59-77. 

4 Excluding trifling production in Luxemburg, except in 1904. 

5 Obvious error in original corrected. 

6 Excluding 135,699 tons in Luxemburg. 

7 Jahrb. f. d. O. Dortmund, 1901-1904, p. 728. 

Note.— Columns 1, 2, and 5, Jahrb. f. d. O. Dortmund, 1901-1904, p. 728; columns 3 and 4, Enquet, 
S. V., Anlage 7; column 6, Enquete, VIII, p. 717; column 7, Enquete, IX, p. 161. 



TRUSTS IN FOREIGN COUNTRIES. 



95 



An inspection of this table shows a great increase between 1895 and 
1900 for all the products given, except rods and tin plate. The de- 
crease in production in 1901 is equally general, with a slight recovery 
in 1902. With 1903 production quite generally forged ahead of 
previous figures, and has continued to increase since. The steadiness 
with which production has increased in Germany is remarkable. 
Voelcker states that the normal increase in the demand for steel in 
Germany is about 420,000 tons per annum. 1 The pig-iron production 
in Germany during the nine years ending 1904 increased at an aver- 
age rate of 510,000 tons per annum. The production of pig iron in 
1904 showed practically no increase over 1903, while half-products 
declined slightly. 

The production policy of the steel syndicate during the period of 
two years since its establishment has not been characterized by any 
extraordinary features. The syndicate has published the statistics of 
production only for A products. The shipments of these products 
(reckoned in crude steel weight) were as follows: 

Tons. 

Mar. 1, 1904, to Feb. 28, 1905 (12 months) 4,533,805 

Mar. 1, 1905, to Dec. 31, 1905 (10 months) 4, 517, 512 

The production of the first business year was about 1.4 per cent 
less than the quotas prevailing for that period. The production for 
the first eight months of the second business year, however, w T as about 
9.9 per cent greater than the prevailing quotas for that period. 2 For 
the chief subdivisions of A products the shipments, reckoned in 



crude steel weights, were as follows : 3 








Period. 


Half prod- 
ucts. 


Railway 
material. 


Structural 
steel. 


Mar. 1, 1904, to Feb. 28, 1905 (12 months) 


Tom. 
1.599,598 
1.661,649 


Tom. 
1,394,623 
1,399,960 


Tons. 
1,529,435 


Mar. 1, 1905, to Dec. 31, 1905 (10 months) 


1,455,903 







Comparing the same periods, the shipments during the first 10 
months in the second year exceeded the shipments during the first 10 
months of the first year as follows: For all A products by 18 per cent, 
for half products by 23 per cent, for railway material by 20.4 per 
cent, and for structural steel by 11 per cent. The production policy 
of the sjmdicate as indicated by these figures shows a decided tend- 
ency toward expansion. It is instructive to compare the policy of 
the steel syndicate with the half-products syndicate which preceded 
it. The following figures for half products are in finished weights : 4 

Tons. 

Mar. 1, 1902, to Feb. 28, 1903 1,460,037 

Mar. 1, 1903, to Feb. 28, 1904 1.449.098 

Mar. 1, 1904, to Feb. 28, 1905 1,411.903 

The sales in 1904-5, under the regime of the steel syndicate, were 
less than those of the half-products syndicate. This reduction came 

1 Voelcker, Revue econ., Decembre, 1904, p. 732. 

2 Cf. Enquete, S. V., Anlage 5; Gliickauf, 1906. p. 82; Stahl u. Eisen, 1905, p. 1385. 

3 Cf. Enquete, S. V., Anlage 5 ; Gliickauf, 1906, p. 82. 

* Enquete, S. V., Anlage 5. 



96 



TRUSTS IN FOREIGN" COUNTRIES. 



out of the export trade, and not out of the domestic supply, as is 
shown by the following table of domestic sales : x 

Tons. 

1902-3 737, 621 

1903-4 844, 629 

1904-5 1, 018, 277 

The data regarding the movement of B products are very meager. 
The syndicate does not generally give out these figures. Kollmann, 
however, gives a statement of the shipments of B products during 
the first year of operation, together with the quotas, as follows : 2 



B products. 


Shipments. 


Quotas. 


Bars 


Tons. 
1,718,211 
371,713 
682, 889 
306, 599 
48,226 


Tons. 
1,847,622 


Rods 


434, 230 


Sheets 


714, 927 


Axles 


351, 546 


Tubes 


53,400 







At the end of March, 1905, the syndicate voted to increase the 
quotas for bars and sheets by 5 per cent. This increase became per- 
manent on July 1, 1905. 3 The total allotment for A products on 
July 1, 1905, was 4,864,485 tons, as compared with 4,614,225 tons 
shortly after the formation of the combination. The addition of 
five more concerns in upper Silesia increased the total to 4,900,000 
tons. 4 In January, 1906, the- quotas for bars and sheets were in- 
creased again by 5 per cent, while the quotas for rods were increased 
10 per cent. The total increase of quotas over the original quotas 
are as follows : Bars and rods, 10 per cent ; sheets, 15 per cent. 5 

The movement of prices in the steel trade has been affected in an 
important degree by the existence of cartels for the various prod- 
ucts, but their influence on prices has been very unequal, and none 
of them ever had complete mastery of the situation. The following 
table shows the general course of development for the chief raw ma- 
terials and the chief manufactured products during recent years: 



Prices of iron, iron products, and raw materials. 

[In marks.] 



Year. 


(1) 

Minette iron 

ore, average 

per ton. 


(2) 

Blast-furnace 

coke, average 

per ton. 


(3) 

"Fetf'coal, 

mine run, 

average per ton. 


(4) 
Thomas pig 
iron (West- 
phalia), 
average per ton. 


1895 


3.30 
3.30 
3.40 
3.55 
3.55 
3.90 
4.40 
2.85 


11.00 
12.02 
13.87 
14.00 
14.37 
21.29 
22.00 
15.00 
15.00 
15.00 


8.00 
8.25 
8.85 
9.08 
9.37 
10.25 
10.25 
9.60 
9.38 
9.38 


45 63 


1896 


56 58 


1897 


56 50 


1898 


60 00 


1899 


70 25 


1900 


90 20-71 80 


1901 


90 20 


1902 


57 13 


1903 


57 21 


1904 




57 80 









1 Enquete, S. V., Anlage 5. 

2 Kollmann, p. 12. 

3 Ibid., p. 31 ; cf. Kartell-Rundschau, 1905, pp. 193. 194, 367-372. 

4 Iron and Coal Trades Review, Dec. 15, 1905, p. 2022. 
15 Deutsche Indnstrie-Zeitung, Jan. 26, 1906, p. 45. 



TRUSTS IN FOREIGN COUNTRIES. 



97 



Prices of iron, iron products, and rate materials — Continued. 
[In marks.] 



Year. 


(5) 

Mill iron 
(Silesia), 
average 
per ton. 


(6) 

Thomas ingots, crude. 


(7) 

Thomas 
billets, 
January 
per ton. 


(8) 

Rails, 
average 
per ton. 


January 
per ton. 


July 
per ton. 


1895 












189(5. 


57.5 
61.7 
61. 6 
75.7 

90.7 
66.5 
60.8 


72.00 
81.00 
83.00 
87.00 
117. 00 
97.00 
75. 00 
77.50 
77.50 


75.00 
84.00 
83.00 
105. 00 
125. 00 
78.00 
82.50 
77.50 
77.50 


81 
90 
93 
97 
127 
107 
90 
90 
90 




1897 


103-105 


189S 


108 


1899 


108-127 


1900 


130-140 


1901 


100-120 


1902 


100-105 


1903 


105-130 


1901 













Year. 


(9) 
Beams. 


(10) 
Bar?. 


January per 
tori. 


July per ton. 


January per 
tori. 


July per ton. 


1895 






95.00 
105. 00 
130. 00 
117. 50 
132. 50 
185. 00 
120. 00 
105. 00 
105. 00 


95.00 


1896 


90 
103 
108 
108 
130 
120 
100 
105 
105 


98. 00 
105. 00 
108. 00 
120. 00 
140. 00 
112. 50 
105. 00 
105. 00 
105. 00 


120. 00 


1897. . 


130. 00 


1898. . 


120.00 


1899 


172. 50 


1900 


190. 00 


1901 


105. 00 


1902 


112.50 


1903 


110. 09 


1904 











Year. 



1895 
189« 
1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 



(11) 
Rods. 



January ! July 
per ton. j per ton. 



93.00 
107. 00 
122. 50 
123.00 
125. 00 
185. 00 
150.00 
125.00 
120.00 
112. 50 



93.00 
112. 50 
112. 50 
123. 00 
150.00 
185. 00 
135. 00 
130.00 
120. 00 



(12) 

Boiler 
plate, 
average 

per ton. 



(13) 

Light sheets, 
average 
per ton. 



152.50 
171. 66 

179. 79 
186. 25 
195.00 
210. 42 

180. 00 
158. 33 
150. 00 
151.00 



121.fi7-128.C9 
142. 08-146. 25 
127. 08-133. 75 
127. 10 
184.00 
197. 50 
If 0. 00 
140.17 
135. 88 
125.00 



(14) 

Tin plate, 
average 
per ton. 



292.3 
301.2 
292.9 
289.2 
329.4 
398.0 
340.6 
358.0 
331.3 



Note.— Column 1, Bossslmann, pp. 37, 38, 42: columns 2, 3, 4, 12, and 13, Jahrbuch f. d. O. Dortmund, 

01-1904. pp. 696, 733 (iron prices in 1901 nominal): column 5, Kuh, p. 222; columns 6, 7, 8, and 9, Enqvete, 

v., Anlaee 7 frails, domestic prices at Dusseldorf); column 10, Voelcker, Bericht, pp. 130, 131: column 11, 



1901 
S. 

Enquete, YIIT, pp. 742-74 



column 14, Enguefr, TX, p. 182. 



This table does not present, of course, the details of price move- 
ments, and, in general, it does not show the extremes. For example, 
pig iron was quoted as low as -15 marks in 1901. 1 In Silesia sheets 
were from 205 to 215 marks at the beginning of 1900, and from 125 
to 135 marks at the end of the year. 2 To a very considerable extent, 
also, rebates were granted on the prices quoted, and even on the ma- 



*Cf. J.-B. d. Handelskammer Oppeln. 1001. p. 30; Wieser, "Die rheinisch-westfalische 
Eisenindustrie in der gegenwiirtige Krisis," Jahrb. f. Gesetz. Verwalt. u. Volksw., Jahrg. 
1302, p. o04. 

2 J.-B. d. Handelskammer Oppeln, 1900, p. 29. 

67838—1 2 7 



98 TRUSTS IN FOREIGN COUNTRIES. 

terial previously sold. Most of the coke was sold for 1900 and 1901 
on two-year contracts at 17 marks; and, though the market quota- 
tions ran higher, very little was bought on that basis. 

An inspection of the price table shows that there was a general ad- 
vance in prices from 1895 to 1900. The crisis developed in the middle 
of the latter year. The advances appear quite as early for the manu- 
factured products as for the raw materials, and, on the whole, it may 
be safely asserted that they were the result of general economic in- 
fluences, and that there was no causal relation between them. Dr. 
Voelcker, in his impartial and judicious summary of the situation, 
declares that from 1895 to 1898 the cartels followed a moderate price 
policy, but that from 1899 to 1901 the reverse in general was true. 1 
The uncarteled lines got high prices in 1899 and 1900, owing to the 
favorable market, and the carteled lines were unable to resist the 
temptation to put up their prices to an immoderate height also. The 
fall in prices, after the depression set in, was relatively greater for 
the manufactured products than for raw materials or half products, 
and it came sooner. This was partly due to the fact that the raw 
material cartels took advantage of their strong position to make 
their customers take their supplies on long-term contracts; but the 
latter were also to blame, as they were overanxious to get supplies, 
not suspecting that a crisis was imminent. 2 The two chief offenders 
were the coke syndicate and the pig iron syndicate. 3 The steel syndi- 
cate, at the beginning of its operations, established a scale of domestic 
prices for certain standard products of basic steel. The most impor- 
tant .prices per ton were as follows: 4 

Marks. 

Crude ingots 77. 50 

Rolled ingots (blooms) 82.50 

Billets 90. 00 

Sheet bars 92. 50 

Structural iron 105. 00-108. 00 

Rails 112. 00 

Ties — — 105. 00 

These prices prevailed without essential modification until Novem- 
ber, 1905. A comparison of these prices with those of the years im- 
mediately preceding (1902 and 1903) and the years before the boom 
acquired much headway (e. g., 1896 and 1897) tends to show that the 
price policy of the syndicate has been moderate. English reports 
announce, however, a general 5-shilling advance for half products of 
the steel syndicate in November, 1905, and predict a further rise. 5 
These prices look rather high. The price policy of the syndicate, as 
far as the domestic market is concerned, was enunciated by one of its 
directors, Dr. Voelcker, as follows: "We do not intend to allow our 
prices to change continually with the fluctuations of the market. We 
do not desire, namely, to raise our prices suddenly and rapidly if the 
conditions are very favorable ; we do not wish, on the other hand, to 
reduce our prices in bad times, with a declining demand ; we desire to 
keep the middle course." 6 

1 Voelcker, Bericht, p. 23. Cf. Vogelstein, S. d. V. f. S.-P., p. 86. Dr. Voelcker at that 
time was in the Government service, but since then he has become a director of the steel 
syndicate. 

2 Voelcker, Bericht, p. 255. 

3 Cf. Calwer, Handel u. Wandel, 1901, pp. 31, 32; Voelcker, Bericht, pp. 38-45. 
4 Enquete, S. V., Anlagen 3, 5, u. 7. Cf. Kollmann, p. 26. Kollmann gives the price 
of rails at 118 marks. 

" Iron and Coal Trades Review, Nov. 17, 1905, p. 1687. 
6 Enquete. S. V., p 3. 



TRUSTS IN FOREIGN COUNTRIES. 



99 



The syndicate does not fix the prices of light rolled products. The 
price movement for some of the principal lines is shown in the follow- 
ing table : 

Prices of light-rolled products. 1 



[In marks.] 





Date. 


Bar steel 
(converter). 


Hoops. 


Boilei plate 
(converter). 


Light sheets 
(converter). 


Rods 

(converter). 




1904 


107-110 

112 

112-115 

110-112 

106-108 
110-115 
110 
110-112 
112-115 

115-118 


122. 50-127. 50 
125 -130 

122.50-127.50 
122. 50-127. 50 

122. 50-127. 50 

123 
123 -125 
125 -127. 50 
125 -127. 50 

130 -132. 50 


150 
155 
150 
150 

150-155 
150-155 


115 
115 
115 
115 

115 
120 -122. 50 
115 -120 
112 -120 

122. 50-125 

126 -130 


112.50-117.50 


Apr. 1 


112. 50-117. 50 


July 1 


120 


Oct. 1 

Jan. 1 — 
Apr. 1 . . . 

July 1 


1905. 

1906. 


112. 50-117. 50 

112.50-117,50 
125 
125 


Oct. 1 

Dec. 1... 

Jan. l.... 


130 

130-135 

130-135 


125 
127. 50 

132.50 



1 Stahl u. Eisen, 1905, p. 1216. 

A distinct upward movement is observable in the last half of 1905, 
to which boiler plate forms an exception. This corresponded to an 
increase in consumption, especially in the domestic market. 1 Com- 
paring these prices with those of preceding years, the prices of bar 
steel were unduly low ; and the same is true also for light sheets and 
for rods in 1901. In 1905 the prices of light sheets moved erratically 
and were on the whole too low, while the prices of rods advanced to 
a reasonably good basis. The position of steel bars became tolerably 
good only at the beginning of the year 1906. 

The burning question of the steel trade since the crisis has been 
the position of the straight-rolling mills (reine Walzwerke) with 
reference to the mixed-steel works (gemischten \Verke). The latter 
are the great works which generally have their own raw materials 
and combine the manufacture of heavy and light steel products. 
Though for a time in the seventies and eighties this integration in 
industry fell into some disfavor, 2 it is accepted to-day in Germany, 
as elsewhere, as the necessary basis for large and successful opera- 
tions. Of the 31 original members of the steel syndicate, 17 produce 
coal, 25 iron ore, and 27 pig iron. 3 These large steel works produce 
also the bulk of the light-rolled products. For example, they produce 
about three- fourths of the bar steel of Germany. 4 Probably the 
straight-rolling mills do not produce over one-seventh. The straight- 
rolling mills are almost entirely dependent on the large steel works 
for their material, and they are at a disadvantage both in the manu- 
facture and sale of light-rolled products. The superiority of the 
steel works is based on (1) technical superiority, (2) economy in 
general expenses, and (3) economy in freights. Their technical 
superiority relates almost entirely to standard commodities, produced 

1 Gliickauf. 

2 Cf. Bosselmann, p. 54 ; Stillich, Eisen- und Stahlindustrie. Berlin, 1904, pp. 40, 160, 
162 : Heymann, pp. 145-148 ; Eisen-Enquete-Kommission. 1878, p. 4. 

3 Enquete. S. v., Anlage 4. 

* Kartell-Rundschau, 1905, pp. 369, 490-492. 



100 TRUSTS IN FOREIGN COUNTRIES. 






in great quantities, and is found chiefly in the economy of fuel and 
in the economy of construction and operation of plant. Considering 
these economies only so far as they relate to the rolling of the light 
products, the straight-rolling mills concede that the large works have 
an advantage of from 4 to 6 marks per ton in rolling crude steel. 1 
It is principally a question of saving heat by direct rolling. It is 
also obvious that the construction of a plant for a continuous and un- 
interrupted process is more economical. This factor, as well as that 
of saving in general expenses, which is equally obvious, is difficult to 
estimate. The saving in freight is estimated to average \\ marks per 
ton. 2 Not ail the large steel works enjoy these advantages, as they 
have not all been rationally located and constructed. The commer- 
cial advantage of the mixed work rests partly on their commercial 
and financial preponderance and partly on their influence over prices 
and production. 

The complaints of the straight rolling mills may be concisely 
formulated as follows : That the prices of half products are too high 
in comparison with the prices of light rolled products ; that the steel 
works, although they control the export, have been dumping half 
products; that the export prices are excessively low; and that the 
export bounties are insufficient to enable the straight rolling mills to 
compete with foreign mills using German half products. 3 Regard- 
ing the price policy in the domestic markets, extensive comparisons 
might be made ; but it is sufficient to cite that of Springmann, a leader 
of the straight rolling-mill group, who divides the decade 1895 to 
1905 into two five-year periods' — a period of prosperity and a period 
of depression. The margin between crude ingots and bar steel in 
the first period was 49.75 marks and in the second 29.54 marks. He 
compares these with the margins between crude ingots and beams, 
which for the same periods were, respectively, 21.15 marks and 26.60 
marks, and he claims that the steadiness of the latter was due to the 
fact that the steel- works combinations controlled the prices of beams. 
A representative of the steel works claimed, on the other hand, that 
the margins for beams were reasonable, as well as the margin for 
bars during the second period, but that the margins for bars had been 
too high in the first period. 4 On a previous occasion Springmann 
claimed that a margin of 37.50 marks was necessary between rolled 
ingots (blooms) and bar steel, while A. Kirdorf (head of the half- 
products syndicate) asserted that 22.50 marks was sufficient. 5 The 
truth here probably lies near the mean. The rolling mills seem to 
make a better prima facie case in the margins for rods. They cite 
the cost of rolling rods, as given by the half -products syndicate, as 
21 marks. The price of billets was 90 marks, which, together with 
21 marks for rolling and 1.50 marks for freight, makes a total of 
112.50 marks. The prevailing price for rods, including domestic and 
export trade, and deducting bounties, was 108.21 marks from Januarv 
to March, 1904, and 107.71 marks from April to June, 1904. They 
were compelled, therefore, to sell at 4.29 marks and 4.79 marks, re- 
spectively, below a fair cost of production. 6 The representatives of 

i Enquote, S. V., Anlage 3. 
2Cf. ibid., p. 12, Anlage 3. 

8 Cf . Denksehrift zur La^o der Halbzeug kaufenden Walzwerkc im letzten Vierteljahre 
1904 : Enquete, S. V., Anlage 3. 
*Enquete, S. V., p. 23. 
B Cf. Enquete, VT, p. 410. 
e Ibid., S. V., Anlage 3. 



TRUSTS IN FOREIGN COUNTRIES. 101 

the straight rolling mills claimed that the steel works made exorbitant 
profits on half products, 1 but A. Kirdorf denied it and offered to 
prove it from the books of his company. He said that there were 
great differences in cost and that the steelworks that produced at a 
disadvantage had as good a claim to have prices adjusted to make 
their business profitable as the straight rolling mills. 2 

This conflict of interest has not appeared in Silesia, which is clue 
partly to technical conditions and partly to the organization of the 
industry. A sliding scale has been established between rolled prod- 
ucts and pig iron which automatically adjusts the margin. 3 

The steel syndicate is incomplete in two important points: (1) 
The open-hearth mills are not in the combination; (2) the B-products 
are not syndicated. The bar steel production from the open-hearth 
furnaces is said to be 10 per cent of the total. 4 The steel syndicate 
has made strenuous efforts to bring them in, but without success. 
It is said that they demand exorbitant quotas. 5 It has also been ac- 
tive in trying to bring about some modus vivendi for the straight roll- 
ing mills, which can hardly be brought into the syndicate before the 
open-hearth furnaces. Various schemes have been proposed. Under 
their present disadvantageous position they have a relatively depre- 
ciated value. If they were admitted into the syndicate with reason- 
able quotas, they would unquestionably be coveted by the large mills, 
but it is difficult to see how the s}mdicate works could be induced to 
give away valuable privileges without a consideration. The straight 
rolling mills have proposed a sliding scale, but the proposed margins 
are high. Finally, the syndicate has made a counter proposal that 
the straight rolling mills buy half products at ruling prices, and sell 
the rolled products to the syndicate with a fair allowance for the cost 
of rolling. 7 The syndicate wished to get control of the sale. The 
syndicate has made some effort to help bring about a separate cartell 
in bar steel, but the game of cartell politics is complicated, and there 
were some reasons for going slowly, e. g., securing first the adhesion 
of the other Silesian mills and the open-hearth furnaces. 8 The 
straight rolling mills, according to admissions from their own side, 
have been quite immoderate in their demands. 9 Accusations have not 
been w anting, however, that the syndicate is really aiming to destroy 
the straight rolling mills, and to get control of the finished products. 10 
though this is emphatically denied. 11 

The complaints of the straight rolling mills regarding the export 
policy of the steel syndicate concerns a matter of much greater inter- 
est to German industry and the world at large. The imports of steel 
are of minor consequence, although in the boom period, especially in 
1899 and 1900, there was a considerable importation of pig iron and 
half products. 12 The exports are shown in the following table : 

iCf. Enquete, S. V., pp. 403, 511, 512. 
2 Ibid., VI, pp. 396, 409, 418. 
8 Cf. Hermann, p. 313. 
4 Ta?eblatt, Aug. 17, 1905. 

5 Cf. Deutsche Industrie-Zeitung, Mar. 17, 1905 ; Kartell-undschau, 1905, p. 144. 

6 Enquete. S. V., Anlage 8. 

7 Kartell-Rundschau, 1905, pp. 490-492. 

8 Cf. Ibid., p. 427 ; Enquete, S. V., p. 26. 

9 Cf. Enquete. S. V., p. 20. 

10 Deutsche Metall-Industrie-Zeitung, Jan. 7, 1905 
u Enquete, S. V., p. 3 (Voelcker). 

12 Jahrb. f. d. O. Dortmund, 1901-4, p. 734. 



102 



TRUSTS IN FOREIGN COUNTRIES. 



Exports of the German Customs Union. 
[In thousands of tons.] 



Years. 


Pig 
iron.i 


Half 
products. 1 


Finished 
products.* 


1898 


272 
235 
191 
304 
516 
418 
226 


35 
23 
34 
202 
636 
638 
396 


1,312 

1,244 


1899 


1900 


1,355 
1,815 
2,127 


1901 


1902 


1903 


2,281 


1904 


2,022 





Voelcker, Bericht, p. 29. 



2 Jahrb. f. d. O. Dortmund, 1901-1904, p. 734. 



The domestic demand was so keen in 1899 and 1900 that the ex- 
ports of pig iron declined. It is remarkable that finished products 
declined also. With the beginning of the depression in the domestic 
markets producers were led to increase their exports. This is espe- 
cially marked for pig iron in 1901 and for half products in 1902. 
The exports of finished products do not show such a decided increase. 
The straight rolling mills complained that the steel works were 
dumping their production in England, both during the regime of 
the half -products syndicate and since the steel syndicate was formed. 
In answer to this charge the steel syndicate submitted the following 
table for domestic and export sales of half products (finished 
weights) : 2 



Years. 


Domestic sales. 


Export sales. 


Quantity. 


Percent. 


Quantity. 


Per cent. 


1902-3 


Tons. 
737, 121 
844, 629 
1,018,277 


50.50 
58.26 
72.12 


Tons. 
723,016 
605,069 
393, 626 


47.97 


t 903-4 


41.47 


1904-5 


27.88 







The sales in 1901-5 were made during the regime of the steel syn- 
dicate. The question of dumping applies only to half products, so 
far as other branches of the steel industry are affected, because the 
other A products — namely, rails and beams, etc. — are necessarily 
sold to the consumers in the countries where they are used. National 
interest, however, is almost equally opposed to dumping these prod- 
ucts. The policy of the steel syndicate in the sale of all A products 
for the first year of its activity (1901-5) is shown in the following 
statement (crude steel weights) : 1 



Commodity. 



Domestic sales. 



Quantity. 



Per cent. 



Export sales. 



Quantity. 



Percent. 



Half products 

Railway material 
Structural iron... 



Tons. 
1,154,910 
1, 049, 454 
1, 174, 147 



72.20 
75.25 

76.77 



Tons. 
444, 688 
345, 169 
355, 288 



27.80 
24.75 
23.23 



1 Enquete, S. V., Anlage 5 



TRUSTS IN FOREIGN COUNTRIES. 103 

The steel syndicate makes unquestionably a favorable showing. 
It also points out that, though the export of manufactures of half 
products has declined somewhat, the decline has not been so great as 
the decline of half products. 1 It is improbable that the straight roll- 
ing mills cuuid have so increased their output as to have absorbed 
all the half products exported, if they had been given the chance. 2 
The straight rolling mills complain particularly of the exports to 
England. Although the steel syndicate could show from the official 
trade .statistics there had been a heavy decline in this particular direc- 
tion, it was well known that in former }^ears a good deal of the Eng- 
lish export was reshipped to America, and so a real decline for the 
English market was not proven. The best argument of the syndicate 
was that the German half products did not constitute more than 3.8 
per cent of the total English consumption. 3 

The complaints against the export policy of the steel works were 
directed against prices quite as much as quantities. Low export 
prices have always prevailed in the German iron and steel trade. 4 
The report of the German steel companies frequently admit it. 5 
There is no question that the export prices of half products have been 
very low. but various circumstances must be taken into account in 
estimating the effects. A good deal depends at what point of deliv- 
ery or sale the prices are compared, and how the freight is reckoned 
in making comparisons. The rolling mills are apt to compare prices 
at the producing mills, while the steelworks prefer to compare the 
prices delivered at the respective places of consumption. 6 .Where 
export bounties are allowed, they must of course be counted in. In 
order to discuss this question satisfactorily, it would be necessary to 
know what the export prices really were, for what quantities they 
applied, and what proportions of the prod acts made therefrom went 
to different markets where they really met German competition. 
The theoretical considerations are intricate, while the information as 
to the facts is totally inadequate, so that it is impossible to make a 
very confident statement about the real effects of the low export 
prices. Lippert, a representative of the straight rolling mills, quoted 
export prices at Antwerp, f. o. b., at 68 marks for ingots, 72 marks 
for billets, and 72.50 marks for sheet bars as compared with domestic 
prices of 82.50 marks, 90 marks, and 92.50 marks, respectively. 7 
These were emphatically declared by the representatives to be excep- 
tional, if made in fact ; and that this was before the present syndicate 
was established. Schaltenbrand, one of the directors, asserted that 



1 Enquete, S. V., Anlage 5. 

2 Cf. Ibid., pp. 13, 14, 15, 16. 

3 Ibid. Anlagen 3 u. 5. 

4 Eisen Enquete. 1878, pp. 13, 44, 56, 72, etc. ; J.-B. Handelskammer, Breslau, 1892, p. 
160 ; Wieser, p. 318 ; Martin, p. 183 ; Raffalovicb, Trusts, Cartels, et Syndicats, Paris, 
1903. p. 21, note, etc. 

6 Cf. e. g., G-B. Deutsch-Luxemburgische AG. 1902-3: " Kaum die Selbstkosten 
gedeckt werden konnten ; " G-B. Phoenix, 1901-2 : " die Preise ausserst massig sind, 
und einen Gewinn ueberbaupt nicbt uebrig lassen." 

6 Two calculations may be given for illustration, which were offered at the enquete 
concerning the half-products syndicate. A. Kirdorf gave the following example : Export 
price for rolled ingots at works to English mills, 76 marks; freight to seacoast, 3 marks; 
sea freight, 6 marks ; total cost, c. i. f. England, 85 marks. Domestic price delivered, 
84 marks ; export bounty, 10 marks ; total cost delivered, 74 marks. Kirdorf gured for 
each concern delivered/ The German concern which exported its finished product to 
England still had freight to pay. Springmann made his calculation as follows : Export 
price for billets, f. o. b. Antwerp, 72 marks; freight from Dortmund (producing works), 
5.70 marks ; net price at works, 66 marks, approximately. Domestic price, 90 marks ; 
export bounty, 10 marks ; net price at works, 80 marks. Springmann figured the price 
at producing works. Enquete, VI., pp. 426, 430. 

7 Enquete, S. V., p. 17. 



104 TKUSTS IN FOREIGN COUNTRIES. 

the export was necessary, and they had to take what they could get. 
He admitted that the export prices were a little lower than the do- 
mestic prices, but he claimed that, if account were taken of the 
export bounties and other conditions, the domestic mills received the 
more favorable terms. He also quoted the real average proceeds 
from the export trade of the steel syndicate for ingots, billets, and 
sheet bars ; but these figures were not printed in the published proto- 
col. 1 Complaints against the steelworks have also been made with 
respect to the prices at which they sold finished products abroad in 
competition with the domestic consumers of their half products. 2 

Space does not permit going into further details in regard to this 
question. It has become chiefly of historical interest in consequence 
of the recent vigorous hausse in the German steel market, which has 
resulted in the advance of prices all around and brought the export 
prices, according to market reports, very close to the domestic prices. 3 

In order to equalize the disadvantage at which the German ex- 
port industry has been placed with respect to manufactured products 
in consequence of the low export prices of the raw material cartels, 
export bounties have been paid from time to time by the latter to 
such of their customers as were engaged in the export trade. This 
practice extends back to 1891 4 in the iron trade, and perhaps earlier. 
The significance of the export bounty system naturalty became much 
greater in the period of depression which followed the crisis of 1900, 
and it was considerably extended. In 1902 it was systematically 
organized by the establishment of an " export accounting office " 
(Abrechnungsstelle fur die Avrsfuhr), in which the coal, coke, pig- 
iron, half products, and beam cartels united to pay export bounties 
to each other and to the mills which made and exported the finer 
products. These bounties were based on a calculation of the amount 
of raw material consumed in making the finished product. 5 The 
general principles established for the payment of these bounties were, 
first, that they w^re payable only to members of a cartel, and second, 
that the raw materials consumed must be supplied exclusively by 
the cartels paying the bounties. 6 At the beginning of 1904, when 
the steel syndicate commenced operations, the bounties were paid 
according to the following scale: 7 1.50 marks per ton of coal, 2.50 
marks per ton of iron (exclusive of coal bounty), 15 marks per ton of 
half products (inclusive of coal and iron bounty), 20 marks per ton 
of structural steel (inclusive of coal and iron bounty). 

Except for a slight reduction of the bounty on half products for a 
short time, these bounties prevailed through 1904 and 1905. 8 At the 
end of 1905 the steel syndicate decided to grant export bounties 
only to such cartels as syndicated the foreign as well as the domestic 
sales, but at the same time they made a very important exception to 
this, as well as their previous rule; namely, they consented to give a 
bounty of 7 marks per ton for half products consumed by the pro- 
ducers of steel bars, although there was no cartel at all in this com- 
modity. This bounty was to begin with the second quarter of 1906. 
The reason for this exception was that the establishment of a cartel 



lEnqueto. S. V.. pp. 10, 18, 20. 

2Cf. Ibid., pp. 15, 16. 

»Cf. Iron and Coal Trades Review, Nov. 17, 1905, p. 1087. 

* Raffalovieh, p. 23. 

s Vide Walker, p. 223. 

«Wieser, p. 307; Vogolstein, S. d. V. f. S.-I\, pp. 119, 120; Enquete, S. V., p. 431. 

7 Kartell-Rundschau, 1904, p. 373; Enquete, S. V., Anlagc 3. 

8 Kartell-Rundschau, 1904 p. 871; 1905, pp. 145, 318. 



TRUSTS IN FOREIGN COUNTRIES. 105 

in bars was deemed practically impossible. 1 If. as has been fre- 
quently claimed, there are some influential steel works in the syndi- 
cate who have obstructed the formation of a cartel for bars, this 
measure seems calculated to bring them around somewhat. 

In the agreement constituting the steel syndicate one of the powers 
of the Beirat is ,; the granting of authority to the Vorstand to con- 
clude protective and other agreements." Under this clause the syndi- 
cate has made agreements with foreign steel producers, which form 
a cardinal feature in its policy. Such agreements are by no means 
an innovation. An international rail pool which existed for a couple 
of years was dissolved in 1886. 2 In recent years there have been 
numerous international agreements in the steel trade, as, for example, 
rails, beams, rods, heavy sheets, wire nails, enamel wire, pig iron, 
etc. 3 These various cartels include a number of different countries, 
but particularly Germany's nearest neighbors, France, Belgium, and 
Austria. The policy of forming international agreements is the 
logical development of the polk^ of forming local or domestic agree- 
ments, and generally presupposes the latter. In the iron and steel 
industry combinations of a more or less comprehensive character exist 
in all the important producing countries, and there is no doubt that 
the formation of powerful combinations in one country stimulates 
its rivals to strengthen themselves in a similar manner. To a cer- 
tain extent, indeed, the formation of the United States Steel Cor- 
poration has had an influence in bringing about the formation of 
the steel syndicate in Germany. 4 The establishment of the steel syn- 
dicate not only gave the German producers a greater power and 
prestige in foreign markets, but it also made it possible for them 
to make advantageous agreements with their rivals for the elimina- 
tion of competition. The steel syndicate promptly availed itself of 
this opportunity. 

A very circumstantial account of certain of these transactions was 
published in the Eevue economique internationale for December, 
1904, signed by c ' un industriel beige." 5 According to this authority 
a meeting was held at Aix la Chapelle in June. 1901, which resulted 
in the formation of an international beam pool between Germany, 
Belgium, and France, with quotas of 73.45 per cent, 15.05 per cent, 
and 11.05 per cent, respectivelv. This agreement was signed on 
Xoyember 21. 1901.' It is to terminate on June 30, 1907. 6 Central 
selling office.-* were established at Dusselclorf, Brussels, and Paris. 
Negotiations were being conducted at the same time concerning the 
formation of an international rail pool, which appears to have been 
consummated on November 28, 1904, to take effect from October 11, 
1904. The countries entering this pool and their quotas were as 
follows: England, 534- per cent; Germany, 28.83 per cent; Belgium, 
17.67 per cent: and France (which came in later). T £j 8 8 for the first 
year, T |v 8 8 for the second, and T f^ 4 T for the third. This agreement 
was to terminate on March 30, 1908. 7 The central bureau was located 

1 Kartell-Rundschau, 1905, p. 692. 

2 Of. Handelskanimer zu Bochum, 1886, p. 13. 

3 Bosselmann, p. 61 ; Vogelstein, S. d. V. f. S.-P., p. 121 ; Kartell-Rundschau. 1903, p. 47, 
1197 ; Deutsche Industrie-Zeitung, August 7, 1903 ; Wibaiit, Trusts en Kartellen, Amster- 
dam, 1903. 

4 Cf . Gemeinfassliche Darstellung des Huttenwesens, Dusseldorf, 1903, p. 120. 

B Le Syndicat International au point de vue beige. 

6 Of. Kollmann, p. 47. 

7 Cf. Ibid., p. 47 ; c. * * * "La metallurgie franchise." Revue econ. internat., 
D^cembre. 1904. 



106 TRUSTS IN 'FOREIGN COUNTRIES. 






in London, besides local bureaus for each national group. Since 
then the chief American rail producers have joined this international 
pool. The Berliner Tageblatt reported this fact on December 1, 
1904; the Deutsche Industrie-Zeitung alludes to the fact in its issue 
for January 20, 1905 (stating that the pool had already received 
numerous orders) ; and Kollmann states it also in his account of the 
steel syndicate, giving the American members of the pool as the 
Steel Corporation, the Lackawanna, and the Pennsylvania. 1 

Information regarding this agreement and the participation of 
American interests therein was not very generally known outside the 
trade apparently, so that on July 1, 1905, the New York Times came 
out with headlines announcing that the European and American pro- 
ducers had divided the world's markets, according to which Central 
and South America were to be left to the United States, 2 together 
with other details. Various statements have appeared concerning 
the terms of the agreement, but none apparently which bear the evi- 
dence of complete and authentic information. 3 An article in the 
Neue Hamburger Boersen Halle which seems to have had some spe- 
cial source of inspiration declares that the terms of the agreement, 
etc., had been kept secret at the express wish of the Americans; 4 and, 
in this connection, it may be noted that the directors of the steel syn- 
dicate refused to discuss or dmilge their agreements with foreign 
producers on the ground that they did not feel authorized to reveal 
the business secrets of their associates. 5 Considering only the aspects 
of this situation from a German standpoint, it is evident that such 
agreements are of great significance to the steel trade, and a benefit 
not only to the German steel trade, but also to the whole national 
economy. For England, which has been the dumping ground of all 
nations, the situation is doubtless more complicated; but for Ger- 
many it can hardly be disputed that an arrangement that tended to 
raise export prices more nearly to a level with domestic prices would 
be of almost unalloyed advantage. For the straight rolling mills an 
international pool in half products would be particularly beneficial; 
but, although negotiations in this direction are reported, nothing 
seems to have been accomplished. 

In passing judgment on the steel syndicate, it must be borne in 
mind that it is only a torso until the light-rolled products (B prod- 
ucts) are included in its sales. It is probable that this will be ac- 
complished before long, and it is probable also that the process of 
concentration will not end at that .point. It is possible that some- 
thing more comprehensive than the United States Steel Corporation, 
though not as large, may be the final result. According to the pre- 
vailing German view of industrial organization, combinations, like 
men, may be " good " or " bad," according as they conduct them- 
selves. Up to the present the steel syndicate should be classed, on 
the whole, as a " good " combination ; but it has yet to endure a 
serious ordeal, although the present hausse may show whether it pos- 
sesses the most difficult and most valuable of cartell virtues — 
moderation. 



1 Kollmann, p. 47. 

2 In the issue of July 2, 1005. it was stated that the American participants were the 
United States Steel Corporation and the Pennsylvania, Maryland, and Cambria Steel 
Companies. 

8 Cf. Kartoii-Rundsehau. 1905, pp. 390, 392, 440; Deutsche Industrie-Zeitung, December 
9, 1904, p. 432. 

4 Cf. Kartell-Run dschau, 1905, pp. 390, 391. 
6 Enquete, S. V., p. 10. 



LEGAL STATUS OF TRUSTS IN GERMANY. 

By Consul General A. M. Thackara, Berlin, January, 1911. 

The commercial tendency of the present time is toward concentra- 
tion of capital and enterprise. I believe that in no country in the 
world has there been greater development of trade combinations, 
understandings of one form or another, than in Germany. Trade 
combinations which have been in existence for many years are ex- 
tending their influence and new ones are constantly being formed. 
As stated by Consul General Mason in a report upon trade combina- 
tions in Germany, published in a special volume of consular 
reports : x 

A cartel or trade syndicate is defined by Liefmann as a " combina- 
tion for the purpose of maintaining the competitive power of its 
members, notwithstanding their varying individual facilities, against 
the advantages enjoyed by monopolists " by means of— 

(1) Obtaining a uniform maximum selling price for products. 

(2) By the creation and maintenance of a normal and rational 
demand for materials and labor. 

(3) ~By creating a monopoly for every member or for every group 
of members in each branch of production. 

THREE CLASSES OF SYNDICATES. 

All trade syndicates are organized for one, two, or all three of 
these purposes, and as known in Germany they may be divided into 
three general groups or classes, as f oIIoavs : 

The " Selling Agreement," a cartel or convention under which the 
manufacturers or producers of a certain article or class of products 
agree not to sell their product below a specified minimum price 
agreed upon by all members of the cartel and changed from time to 
time in accordance with the varying cost of production and general 
requirements of the market. These rather loosely organized com- 
binations were the original type of German trade syndicates and 
served their purpose very well in prosperous times, but in periods of 
depression and diminished demand it was found difficult to hold 
certain members to the agreement, and it was decided to adopt a 
more binding form of organization and put the business of selling 
under direct control of a central authority. 

AGREEMENTS FOR SALE OF PRODUCTS. 

This led to the creation of " Sale Syndicates " in which all mem- 
bers of a cartel pool their products to be sold through the ministra- 
tions of a central committee, which besides fixing the selling price 

1 Special Consular Reports: Trusts and Trade Combinations in Europe, Vol. XXI, 
Part III. The supply of this volume is exhausted, but a file copy may be consulted at 
the Bureau of Manufactures. 

107 



108 TRUSTS IN FOREIGN COUNTRIES. 

apportions among the members orders as they are received, in pro- 
portion to the capacity of each, the quality of the merchandise 
ordered, and the conditions of transport. 

Examples of this class, which is by far the most numerous and 
important in Germany, are the Khenish-Westphalian Coal Syndi- 
cate, which controls the production and sale of coal in western Ger- 
manjr, and the recently organized Westphalian Pig Iron Syndicate. 
In a syndicate of this class, the individual firms and companies 
which it includes retain their corporate autonomy, pay dividends on 
their own stock according to earnings, and unless otherwise agreed 
in the cartel, purchase independently the raw materials of manu- 
facture. 

The third class includes the real trusts or closely organized syndi- 
cates, which absorb and take up the shares of the original corpora- 
tions, issue new stock, and consolidate the whole management under 
the absolute control of a central authority. 

All these various forms of syndicates are organized under the very 
comprehensive and far-reaching German general laws. 

CHARTERS AND REGISTRATION. 

There is no particular requirement that a cartel or syndicate shall 
obtain a charter from the Imperial or State Government or file in 
any Government office a copy of the contract or protocol which forms 
the basis of such associations other than the copy required under the 
provisions of the general law' applying to the form of company 
chosen. If, in the case of a " Selling Syndicate," a special central 
office is opened for selling the products of its several members, this 
office must be registered like any other business house in the com- 
mercial register (Handelsregister) of the proper local court, and is 
subject to the general law governing corporations, but no other or 
unusual formality is imposed. 

Concerning the methods used in the formation of the various trade 
combinations in Germany, their legal status, and the attitude of the 
Imperial and State Governments toward these combinations, the 
following data have been prepared by an American lawyer practicing 
in this city: 

I. LE3AL FORM. 

When two or more persons or firms combine to do or refrain from 
doing certain things, the simplest way of giving legal expression 
thereto is by entering into a mutual agreement or contract, specify- 
ing the positive or negative obligations of the parties. Such syndi- 
cates or cartels are usually known as " conventionen." Negative obli- 
gations are recognized by section 241 of the German Civil Code, so 
that agreements to refrain from lowering prices or from selling or 
producing more than a given quantity, are not necessarily illegal, 
certainly not on their face. 

Such contracts are usually balanced in the consideration and 
counter consideration specified and therefore come under the defi- 
nition of mutual contracts as defined by section 320 of the German 
Civil Code. There has been a difference of opinion among German 
jurists as to whether the legal relation thereby created was to be re- 



TRUSTS IN FOREIGN COUNTRIES. 109 

garded as merely contractual or as approximating to that of a 
partnership. The adherents of the latter view maintained that the 
mere presence of mutual contracts was not enough, but that the end 
to which such contracts were concluded must be considered and that 
this end was the attaining of some common object, which brought 
them under the provisions of section 705 of the German Civil Code. 
This question, however, is mainly one of theoretical interest and may 
be dismissed. For practical purposes, however, it is generally accepted 
that a cartel or syndicate bears such a similarity to a company in the 
sense of the German Civil Code that many of the provisions of the 
latter are regarded as applicable by analogy and there is a decision of 
the German Supreme Court from the year 1902 giving expression 
to the above view. 

It is permissible for various kinds of companies and firms to con- 
clude mutual contracts ; that is to say, " natural persons," " partner- 
ships," " societies in commendam," " limited companies," and " stock 
companies " can conclude mutual contracts among themselves, and 
thus constitute a cartel or syndicate by mutual contract or " con- 
vention." No special form of contract is necessary; indeed, theo- 
retically such a contract could even be made orally. 

Complete mutuality or privity of contract is, however, necessary. 
Each individual contracting party must enter into the contractual 
relation with each other of the contracting parties individually. 

CIVIL PARTNERSHIP. 

The " Gesellschaft des Biirgerlichen Rechts," which may be trans- 
lated as " civil partnership," to distinguish it from the partnership of 
the commercial code, and which is defined by section 705 of the Ger- 
man Civil Code, is in most cases a better and more appropriate form 
than the mutual contract. No specific form is prescribed ; the " com- 
pany contract " or articles of association can be formulated with elas- 
ticity to suit the particular case, and rules may be formulated for the 
general management of the organization. The common purpose 
must, however, be one permitted by law and must not be against good 
morals. The foregoing form can be chosen in all those cases where 
the syndicate or cartel itself does not have to be charged with the 
immediate conduct of the business. 

In the German system of law the threefold division of civil, crimi- 
nal, and commercial law prevails, and consequently, if the syndicate 
or cartel is of such a nature that the business must be conducted di- 
rectly by it, it will probably come under the compulsory provisions of 
the commercial code touching the registry of business undertakings, 
instead of under the civil law, so that the form of the commercial 
partnership or " Offene Handelsgesellschaft " must be adopted. 

COMMERCIAL PARTNERSHIP. 

The commercial partnership or " Offene Handelsgesellschaft " is a 
company formed for the purpose of conducting a mercantile business. 
It is governed and defined by section 10 of the German Commercial 
Cede. Notwithstanding this arbitrary distinction between the civil 
partnership and the commercial partnership, they are very much 
alike, and, unless otherwise prescribed by the commercial code, the 
provisions of the civil code find analogous application. 



110 TRUSTS IN FOREIGN COUNTRIES. 

SOCIETY IN COMMENDAM. 

The " Societe in Commendam " is a company form of which we in 
the United States still have examples in Louisiana, inherited from 
France. This form is known in Germany as the " Kommanditgesell- 
schaft," and it may be compared to our partnership in which the 
partners are divided into active partners and sleeping or silent 
partners. 

In practice it has been found that this form of company is not well 
adapted to the purposes of a cartel or syndicate, one of the prime 
necessities of which is to restrict and control each individual member 
thereof, and where the individual member itself is a company consist- 
ing of two or more natural persons such control must be extended to 
these also, and this is not always easy in the case of the silent or 
sleeping partner. The " Kommanditgesellschaf t " is described in 
section 161 of the German Commercial Code. 

SILENT COMPANY. 

The German " Stille Gesellschaft," which may be literally trans- 
lated as " silent company," is a company form closely analogous to 
the " Kommanditgesellschaft," the main difference being that in this 
case the silent partner acquires an interest in a business or undertak- 
ing conducted by a merchant or tradesman by the contribution of 
capital. 

A merchant or tradesman comes under the provisions of the com- 
mercial code; he who gives the capital, however, is not subject to this 
restriction and does not actively participate in the conduct of the 
business, which is conducted by the merchant or tradesman alone and 
in his own name. This also is analogous to our partnership sole. 
This company form has hitherto been used very little for syndicate or 
cartel purposes for the simple reason that it is inapplicable and 
inappropriate. 

THE VEREIN OR SOCIETY. 

These are divided into two classes, those which are designated as 
" rechtsfahig " and those which are " nicht rechtsfahig." Roughly 
speaking, the German law permits various societies, clubs, and the 
like to exist without necessarily recognizing them as being capable of 
asserting or claiming rights and owing duties in the manner which 
characterizes other company forms. If such a society or club apply 
to the State for a charter and such charter be granted, it becomes a 
" rechtsfahiger verein," because it is the holder of a franchise. 

Neither of these forms lends itself well to the purposes of a syndi- 
cate or cartel, but they are mentioned here for the reason that a great 
many provisions of the German law which apply to these " vereins," 
or societies, find analogous application to other company forms, such 
as " corporations," " limited companies," and " stock companies," and 
" societies in commendam," all of which are employed for syndicate 
purposes. 

THE STOCK COMPANY OR AKTIENGESELLSCHAFT. 

This company form is the German equivalent of the American 
private corporation. It is defined and governed by the provisions of 
the German Commercial Code, supplemented by the provisions of 
the civil and criminal codes. Use has been made of this company 






TRUSTS IN FOREIGN COUNTRIES. Ill 

form especially in those cases where various undertakings have found 
it necessary to establish and conduct a central sales office. The 
main distinction between this form and the preceding ones is to be 
found in the fact that it is a juristic person, whereas the foregoing 
were not, and that the principles of limited liability apply to it. 

The founding of a syndicate undertaking in the form of an 
"Aktiengesellschaft " in this country is in the main so similar to the 
like procedure in America that further consideration of this point 
seems superfluous. Eeference may, however, be made to the differ- 
ence here between u Vorstand " and "Aufsichtsrat," the former being 
the actual board of management and the latter representing the board 
of supervision. The " Vorstand " may perhaps be compared with 
the officers of an American corporation charged with the active busi- 
ness management, whereas the "Aufsichtsrat " is similar to the more 
passive members of the board of directors. 

" GESELLSCHAFT MIT BESCHRANKTER HAFTUNG," OR LIMITED LIABILITY 

COMPANY. 

This form of company is perhaps the most popular of all. It is 
not to be confused with the English limited company, since the 
latter is the full equivalent of the American private corporation, 
whereas the German limited company may be termed a hybrid, 
partaking as it does of several of the essential features of a stock 
corporation and of a partnership. The following may be mentioned : 

(1) It is a juristic person. 

(2) It is represented by one or more business managers. 

(3) The shareholders are limited in their liability. 

(4) The shares are transferable, but only by a notarial or judicial 
act. 

(5) Stock certificates are not issued. 

(6) Contributions to the capital stock may be made either m 
money or in money's worth. 

(7) The construction of such a company can be varied to suit 
almost any conceivable case and may be as simple as a partnership 
agreement or as complex as the charter and by-laws of a stock cor- 
poration, and it can either have a board of directors or other organs 
of supervision or not, as desired. This company form was created 
by a special imperial statute : " Gesetz betreffend die Gesellsehaften 
mit beschrankter Haftung vom 20. April, 1892, in der Fassung der 
Bekanntmachung vom 20. Mai, 1898." 

This form is well adapted to cartel or syndicate purposes. There 
are no restrictions as to residence or nationality of the members of 
such a company, and they may be either natural persons or juristic 
persons. It is perfectly possible, therefore, for any number of 
undertakings existing in various forms each to delegate a repre- 
sentative to cooperate in forming such a limited company. A com- 
pany so formed can act as a central office for receiving and allotting 
orders to its members, receiving payment, regulating prices, and 
dividing dividends. Balance sheets do not have to be published, 
and the resolutions of members may be made either in general or 
in special meetings, or if unanimous they can be made without any 
meeting at all by simply being put in writing and signed by all the 
members. 



112 TRUSTS IN FOREIGN COUNTRIES. 

OTHER FORMS. 

There are still other company forms, but it is not worth while to 
-mention them in this connection, since they are but poorly adapted 
to the purposes of a cartel or syndicate, and for this reason are very 
seldom employed. 

II. POSITION OF THE CARTEL OR SYNDICATE IN JURISPRUDENCE. 

The text writers agree that cartels and syndicates have a recog- 
nized place in the jurisprudence of this country, and that they do not 
per se offend against the principles of freedom of industry and 
commerce. 

The German Civil Code, paragraph 138, says that a transaction 
which offends against good morals is void. The forming of a cartel 
or syndicate is not held to come under this paragraph, but when 
formed it may bring itself under the operation of this provision by 
the means which it may choose to attain its purposes, such as for 
instance boycotting, the cutting of prices with competitors to such 
an extent as to bring about the financial ruin of the latter, misuse of 
their monopoly franchises, and the like. Concerning boycotting, 
there are decisions of the imperial supreme court in the years 1903 
and 1906 on this point. 

The German civil code contains certain paragraphs touching " treu 
und glauben," or truth and good faith, and perhaps these para- 
graphs may be designated as Containing equitable principles in con- 
tradistinction to the more fixed legal rules, there being in Germany 
no system of equity law and no equity courts. The supreme court 
at Leipzig decided in the year 1904 that a stricter moral standard 
must be applied to cartels and syndicates; that is, that they must 
be held to a stricter accounting for the moral quality of their acts, 
because of the preponderance of economic interests which they 
represent. 

SYNDICATE SECRETS. 

According to paragraph 384 of the German Code of Civil Procedure, 
a witness can refuse to answer questions in cases where to answer the 
same would be to reveal an art or industrial secret. The question 
has arisen as to whether a cartel or syndicate falls so far under this 
paragraph as to justify a witness in refusing to give testimony on 
the ground that his so doing would be revealing an art or industrial 
secret. The question is not yet settled, opinion being very much 
divided, but as a matter of fact the courts have in several instances 
upheld the objection of witnesses to testify on that ground. I have 
been unable to ascertain that the cases in question were of any 
great significance or that the paramount interest of the State consti- 
tuted a factor thereof. 

III. LAW OF UNFAIR COMPETITION. 

There exists in Germany a statute touching unfair competition 
which is known as " das Gesetz gegen den unlauteren Wettbewerb." 
Paragraph 1 of the above law consists of a general clause to the effect 
that whoever is guilty of transactions in industrial dealings which 
offend against good morals may be held liable in damages. The 



TKUSTS IN FOREIGN COUNTRIES. 113 

German word is " handlung," which is usually translated b} r trans- 
action or act or the doing of something, since it usually has a positive 
sense, but the text writers, and also the courts, agree that to refrain 
from doing a thing is also a " handlung," or act which, although of 
a negative character, still falls under the operations of the law in 
question. 

It may, therefore, easily happen in the case of a conflict between 
a syndicate and an outsider, that certain acts, or " handlungen," may 
take place offending against this law, and in such cases the law affords 
a fair remedy against the offender. This is really the only special 
German statute which approximates to our law and statutes touching 
the restraint of trade and unfair competition. 

The provisions of the statutes touching unfair competition are sup- 
plemented by the provisions of the civil code relating to the award- 
ing of damages. It seems to be the opinion of the text writers that 
the existing legal provisions and principles give to outsiders and to 
the public in general sufficient protection against an undue use or 
misuse of syndicate power. Some text writers even go so far as to 
maintain that the cartel or syndicate is actually unduly handicapped 
before the courts, simply because it is supposed to be big and powerful. 

SPECIAL LEGISLATION. 

Some years ago special legislation touching syndicates was contem- 
plated, but the general consensus of public opinion did not seem to 
indicate that the necessity for such a measure was then sufficiently 
great, and it has never become law. At present there is no indica- 
tion of further legislation, nor does the public at large, the Imperial 
or State Government feel the necessity for taking any other action 
than such as can be taken under the existing rules and principles of 
law to prevent the misuse of trusts and combines. 

There probably have been cases in which cartels and syndicates 
have been declared illegal by the courts, but I think it will be found 
on examination that these cases are entirely parallel with other cases 
where the illegality was due to some noncompliance or faulty inter- 
pretation of the technical rules of law governing such cases — that is 
to say, was not due to the fact that a trust or combine existed, but to 
the fact that it had not been properly organized — and consequently 
such decisions are of no more importance than similar decisions 
touching an ordinary stock company or limited company or partner- 
ship where the provisions of the law had not been complied with. 

As a matter of fact, the law is not directed against these combines 
per se, but against any misuse of their powers and franchises where 
such can be proved, and the principles and rules touching good faith 
and the moral quality of business transactions can be so strictly ap- 
plied as to give to the public sufficient guaranties to insure its owix 
protection. 

BIBLIOGRAPHY. 

I. GENERAL LAWS. 

German Civil Code (Biirgerliches Gesetzbuch). An English translation pre- 
pared, it is believed, under the supervision of Mr. Draper-Lewis, has been pub- 
lished in Pennsylvania. 

German Commercial Code (Handels-Gesetzbuch). English translation by 
B. A. Piatt, published by Chapman & Hall (Ltd.), London. 

67838—12 8 



114 TRUSTS IN FOREIGN COUNTRIES. 

German Crimiual Code (Strnf-Gesetzbuch). 

Law of Unfair Competition (Unlauterer Wettbewerb ) , June 7, 1909. 
Law of Limited Liability Companies (Gesetz betr. Gesellschaften mit be- 
sehrankter Haftung), April 20, 1892, with the amendment of May 20, 1898. 

II. TEXTBOOKS, COMMENTARIES, ETC. 

Silberberg, Handbuch des deutschen Kartellrechts, 1910; Puttkammer & 
Muhlbrecht, Berlin. 

Liefmann, Kartelle u. Trusts, 1910; Heinrich Moritz, Stuttgart. 

Huber, Die Kartelle, 1903; Stuttgart and Leipzig. 

Grunzel, Ueber Kartelle, 1902; Leipzig. 

Tschierschky, Kartell u. Trust, 1903; Gottingen. 

Baumgarten u. Mesleny, Kartelle u. Trusts, 1906; Berlin. 

Calwer, Kartelle und Trusts, 1906; Berlin. 

Monthly publication, " Die Kartellrundschau ; " Thierschky, Karlsruhe. 

German Iron and Steel Industry, by Special Agent C. M. Pepper, published 
by Bureau of Manufactures; 1909. 

III. SPECIAL WORKS. 

Bonikowsky, Der Einfluss der industriellen Kartelle auf . den Handel in 
Deutschland, 1907; Jena. 

COMMENTS BY THE CONSUL GENERAL. 

As stated before, trade combinations in Germany are not organized 
under special laws, but are formed and operated subject to the pro- 
visions of the general laws, a list of which is given above. Interested 
persons can probably have access to them at the office of the German 
Society of the City of New York, 147 Fourth Avenue, or at the Im- 
perial German consulate general in that city, Congressional Library 
at Washington, etc. 

It may be observed that the Prussian State is a member of the 
Potash Syndicate and is a large miner of potash. The Prussian 
draft of the new potash law contained the provision that all the Ger- 
man potash mines should be compelled to join the syndicate, but 
this compulsory measure was not embodied in the imperial act as 
finally passed. The Prussian State also owns nearly half of the 
stock of the Hibernia coal mine, and at the time the purchase was 
made it was the declared purpose of the Prussian Government to 
obtain a controlling interest in the mine, in order to have a seat in 
the administration of the Westphalian Coal Syndicate, but in this the 
State was not successful. 



LEGAL OPERATION OF TRUSTS IN GERMANY. 

From Consul General Robert P. Skinner, Hamburg. 

Supplementary information is desired to that on the " Legal Status 
of Trusts in Germany " by Consul General Thackara and published 
in Daily Consular and Trade Reports for January 25, 1911. The 
following inquiry has been received : 

I have heard from many sources that the laws of the German Empire covering 
the matter of business arrangements between those in the same line of business 
are most favorable to the interests of the manufacturing and mercantile houses, 
and I take the liberty of addressing you to inquire if you can furnish me with 
a copy of the laws which would cover combines or which would cover the same 
general ground as the Sherman antitrust law in the United States. 

Replying to the above, it may be stated that there is no German 
law of the character described. There is no German law which 
either expressly authorizes or forbids the creation of the so-called 
trusts so numerous in this country. The law merely guarantees to 
the individual the right to engage in trade, but does not Avithhold 
from him the right to combine with any or all of his competitors. 
The theory seems to be that in granting to trade and commerce the 
very extensive privileges referred to by my correspondent, the 
general interests of the public at large are protected by the resulting 
prosperity of such interests, even though the immediate effect m.2ij 
be to enhance the cost of the commodity controlled. 

DIFFERENCE BETWEEN GERMAN AND AMERICAN LAWS AND IDEAS. 

In a recent discussion of the subject Mr. Albert Ballin, the general 
director of the Hamburg- American Line, said : 

In Germany syndicates are protected by several laws, and therefore it may 
arise very easily that the American Government would require the dissolution 
of a syndicate while the dissolution, according to German law, itself would 
become punishable. 

The majority of German business men and economists are not 
opposed to such syndicates and the creation of monopolies, in which 
the State itself sometimes participates in combination with private 
producers, is lawful if the creators commit no injurious act, a limita- 
tion so difficult to define and comprehend that practically the only 
difficulties with which the ordinary cartels come into contact are 
difficulties arising between the members themselves. The courts have 
frequently recognized the perfect right of producers to control their 
product in a monopolistic organization as a right somewhat akin to 
the right to make use of a highway, and only subject to correction of 
abuses of power. 

The profound difference between the German and the American 
conception of sound business conditions is best explained, perhaps, 
by the racial difference between the two peoples — the German with 
strong collectivist tendencies which manifest themselves in society, 

115 



116 TRUSTS IN FOREIGN COUNTRIES. 

in government, and in trade, and the American with a deeply rooted 
individualism which remains even when he engages in a collectivist 
enterprise. Thus it happens that the capitalistic classes of Germany? 
although opposing socialism in their public life, nevertheless drift in 
the direction indicated by their natural tendencies in their business 
life, and in so doing they have the tacit approval of the avowed 
socialistic classes, who perceive in the steady accumulation of the 
producing powers in a few hands a movement tending logically and 
inevitably toward the eventual realization of their dogma — that is, 
the State in supreme control. 

GOVERNMENT CONTROL. 

An extreme example of the German tendency may be found in the 
potash syndicate of which so much has been heard. In this case the 
Prussian State itself was one of the producers, and when a certain 
situation was reached, the State interposed and required by law that 
the entire production of the country should be sold through a single 
selling agency, organized by law, which also established the terms of 
sale and the limitation of production. In this case it was argued 
that the monopolization of the industry was necessary to conserve the 
important mineral resources of the country. The commentators 
upon the claim of industrial organizers that some generally desirable 
end is to be attained point out, as has Gustav le Bon, that — 

Socialism is much less dangerous in reality in its absolute form than when it 
takes on the aspects of simple projects of amelioration by regulating labor. 
Under its absolute form one sees the dangers and may control them. Under 
its altruistic form one does not see them and it is accepted easily. 

The German courts have repeatedly ruled, according to Richard 
Calwer, the socialistic writer, in his Cartelle und Trusts, that the 
syndicates do not violate the principles of trade liberty as they tend 
to protect the interests of the whole nation against the selfishness of 
individuals, and to protect the products of industry from the many 
disadvantages which arise from price cutting. 

Under these rulings absolute or partial monopolization by many 
cartels has been brought about, the national output being reduced, 
with a consequent lifting of prices to a remunerative level. The 
danger point would be reached, from the point of view of the law, 
should a cartel of this character, on the possible refusal of one out- 
side producer to accept its terms, undertake by unfair means to drive 
him into its fold or crush him if he refused its terms, and the diffi- 
culty of the prosecution would be to prove that any such result had 
been contemplated, even though its effect had been attained. 

GERMAN CARTEL UNLIKE AMERICAN TRUSTS. 

The very forms of commercial organization most common in Ger- 
many and America correspond to the temperamental qualities of 
the two peoples. In Germany the commercial trust, or cartel, is 
usually a federation in which each member retains its commercial 
identity while abandoning its freedom of action to the federation for 
a contractual period of 3 or 5 or 10 years or perhaps longer, but 
expecting eventually to get it back, and then perhaps make another 
contract if the results of the first have been satisfactory. A German 
cartel is, as a rule, open to all those who submit to its provisions, and 
the control of the members is confined to the limits traced in the 



TRUSTS IN FOREIGN COUNTRIES. 117 

federal pact. In the typical American trust, instead of this associa- 
tion of units with influence usually rated according to productive 
capacity, we observe generally the permanent ownership of a large 
part of the enterprise by a small group of persons in which there is 
ordinarily some dominating personal element. 

The basic notion of the German organizer has been to control 
production definitely, leaving it to the resourcefulness of the indi- 
vidual producers in the cartel to make more or less profit out of 
the proportion of the production allotted to them; the basic notion 
of the American organizer has been, usually, to create a perfected 
and consolidated instrument, success following naturally as a result 
of its well-balanced and skillfully organized proportions. German 
cartel organization has contemplated that all its constituent firms 
should remain in business; American commercial centralization 
usually has meant that the weaker or for any reason undesirable 
elements should go out of business, suggesting that the strong native 
individualism of our people rises to the surface even when an effort 
tending toward pure collectivism is attempted. 

OPINIONS OF THE GERMAN COURTS. 

Having thus discussed the subject in its broader aspects, it will be 
interesting to read a few extracts from the decisions of the imperial 
supreme court, from which can be gathered the rights and duties of 
business combinations in Germany, rather than in the statutory law, 
which is silent on the question. 

The court, after acknowledging that foreign countries (mentioning 
authorities in France, Russia, and the United States) follow contrary 
principles, bases its opinion that it is to the benefit of the public that 
prices should be kept in a normal state on the following argument 
(Civil S., Bd. 38, 155) : 

If in any branch of business the prices so decline that a profitable trade is 
made impossible thereby, or that the trade is seriously endangered, the crisis 
at the start is not only injurious to the individual person but also from a 
national economic point of view, and it lies, therefore, in the interest of the 
whole that the inadequately low prices in a certain branch of business should 
not permanently exist. Therefore, formerly and at the present time, legislators 
have aimed to increase prices of certain products by inaugurating protective 
tariffs. 

It can not therefore be looked upon as generally contrary to the interests of 
the whole if manufacturers of a certain article form a cartel in order to pre- 
vent or to modify the mutual underbidding and the decline of prices for their 
products caused thereby ; on the contrary, if the prices are continually so low 
that the manufacturers are threatened with financial ruin, their forming a 
cartel is not only to be looked upon as a justified manifestation of self-preserva- 
tion, but also as an act which lies in the interest of the whole. 

The formation of the syndicates and cartels in question, therefore, has been 
designated in various quarters as a means which, if reasonably applied to 
national economies, is especially adapted to prevent uneconomic overproduction, 
yielding no profit and resulting in catastrophes. (Vergl.: Kleinwachter, Die 
Kartelle, S. 160 ff. ; Brentano. Ueber die Ursachen der heutigen sozialen Not, 
insbesondere S. 23 ff. ; Steinmann-Bueher in Schmoller's Jahrbuch fur Gesetz- 
gebung, Bd. 15. S. 451 ff. ; Manck, Eine Weltmonopol in Petroleum, S. 7 ff. ; 
Seemaun. Die Monopolisierung des Petroleumhandels, S. 3 ff. ) 

The imperial supreme court (Civil S., Bd. 56, 277) points out the 
bounds of a cartel. It says : 

A commercial association, or a person carrying on a trade, can not be pre- 
vented from making special conditions to third persons concerning business 



118 TRUSTS IN FOREIGN COUNTRIES. 

contracts or the maintenance of a certain business relation, nor from refusing 
delivery if such condition be not fulfilled. Even if this is a certain limitation 
of the liberty of the parties concerned in order to force them to act according 
to the commercial regulations of the association, it must be stated that not every 
restriction of the free will of another person is necessarily the result of an un- 
lawful or immoral act. 

However, it would be immoral and unlawful, according to article 826, Bur- 
gerliches Gesetzbuch, should the defendant have taken steps through which the 
very existence of the other party was threatened, his commercial enterprises 
crippled or undermined, and his business credit and reputation damaged. 

A DECISION ON TRANSPORTATION. 

In a judgment of April 11, 1901, A. B. v. D. A. Dampfschifffahrts- 
gesellschaft (R. G. Civil S., Bd. 48, 114), the defendant had de- 
manded that the plaintiff give up his shipping facilities to a certain 
point, with the idea that the defendant should monopolize the ship- 
ping business to that point. The plaintiff disregarded this demand, 
whereupon the defendant refused to take the freight of the plaintiff 
either to the place in question or to any other place at the same freight 
rates paid by the public in general. The plaintiff sought to enjoin 
the defendant from refusing to accept the plaintiff's freight at the 
regular rates. 

The imperial court says (p. 124 ff.) : 

Especially article 826, which has the object mentioned above of effectively 
preventing disloyal injury in business intercourse, comes into consideration, 
wherein the nature of the injured property right is immaterial. Also the en- 
croachment upon the rights of other persons, influencing only their business 
prospects or their connections with their customers, may be looked upon as such 
an injury. Even the exercise of a formal legal right is influenced by article 
S26, when a third person suffers damages through measures taken by a party 
with intent to do harm in an immoral way. 

As to the standard of "good morals" (Cf. art. 138 of the Civil Code) the 
judge must consider the predominant feelings of the people, the morals and good 
sense of all those who judge fairly and reasonably. 

Thereby it does not follow that consideration may not be given to the moral 
viewpoint of a particular social class when distinctly stamped as its prevailing 
custom. Such is the case in the present instance, in which the views of every 
honorable merchant in his commercial intercourse must be considered. 

This is not to be confounded with usages or practices which have actually 
been adopted in commercial intercourse, which possibly may constitute not a 
good custom but rather an abuse. If the court of appeals decides the measures 
in question to be similar to those employed in daily open competition the appli- 
cability of article 826 of the Burgerliches Gesetzbuch is by no means ruled out 
quite apart from the actual correctness of the representation of the facts. 

In the struggle for commercial supremacy ft great many machinations and 
actions occur which are by no means looked upon as decent and reputable. 
Especially must article 826 of the Burgerliches Gesetzbuch protect persons in 
the future against the abuse of liberty of trade by parties greedy for gain and 
against oppression and spoliation. 

PRIVILEGE OF MAKING PURCHASES. 

A, a member of a combination, wrote B that unless B in the future 
discontinued making any purchases from firms outside of the combi- 
nation the combination would refuse to sell him any goods. B then 
agreed to buy exclusively from the combination. A was thereupon, 
at the instance of a firm outside of the combination, arrested and 
convicted of a crime under article 253 of the Criminal Code, which 
reads as follows: 

Any person or persons forcing another person to execute, to tolerate, or to 
omit an action, either through violence or threats, in order to secure an illegal 






TRUSTS IN FOREIGN COUNTRIES. 119 

pecuniary advantage (Verniogens-Vorteil) for themselves or for third persons, 
are guilty of extortion and are to be punished with imprisonment not under one 
month. 

The attempt is punishable. 

The defendant pleaded his good faith, relying on the by-laws of 
the combination. The imperial court (Straf — S. Bd. 34, 15-21 ff.) 
says: 

The aforementioned association is a so-called cartel. Opinions differ exceed- 
ingly on the subject of whether such cartels should be approved of under all 
conditions from a national economic point of view or should be restricted. A 
law forbidding the formation of cartels does not exist. The defendants, there- 
fore, were under no restriction whatsoever as to making agreements in the name 
of the firm with the managers of factories or owners of other firms regarding a 
refusal of delivery of goods to certain persons, even if in doing so he endeavors 
to attain a pecuniary advantage (Vermogens-Vorteil). 

The price of a merchandise is, apart from other conditions, established by free 
competition. This free competition is warranted by law, which prescribes, in 
article 1, Gewerbe-Ordnung, that, as a matter of principle, all trade concerns 
(which includes all commercial concerns) shall be free; and in article 7 that 
" no rights to restrict other persons in carrying on a trade shall exist." This 
principle does not stand in their way if persons restrict the possibility of com- 
petition through special agreements by obliging partners to perform certain 
actions or omissions. 

If, however, the regulations of cartels or their execution go beyond the de- 
termination of rules for certain circumstances, and beyond the stipulations con- 
cerning the carrying on of trade by their members who bound themselves to 
these regulations according to the agreements, and if these stipulations encroach 
upon the rights exercised by third persons, they are to be looked upon as un- 
justifiable and not in accordance with the law. 

It must be looked into and determined whether the firms, having formed a 
cartel, endeavored to procure a portion of their business profit through forcing 
the prices higher by tying up competition which stands under the legally war- 
ranted freedom of trade. If this is the case, the portion of their profit thus 
earned is doubtlessly not in accordance with the law. and it is an illegal pecuni- 
ary gain from other persons. (Vergl: Entsch. d. Reichsgerichts vom 23. Ok- 
tober, 1S96, in Goltdammer, Archiv, Bd. 44, S. 274.) 

And if this tying up of competition is reached through threatened exclusion 
of delivery of goods, thereby forcing other merchants to discontinue all busi- 
ness relations with firms standing outside of the cartel and to avoid all connec- 
tions with such firms, although they would be able to purchase cheaper from 
these firms, not only the buyers suffer considerable damages through this illeg&i 
compulsion, but also the sellers at lower prices, who are deprived of continuing 
business through this compulsion if they do not subserve themselves and become 
members of the cartel. In these two cases the firms, being members of the 
cartels, enrich themselves through illegal methods. 

THE EXTENT OF TRUST CONTROL IN GERMANY. 

The first article of the Gewerbe Ordnung of Germany reads as 
follows : 

The carrying on of trade is permitted to everybody unless exceptions or 
restrictions are prescribed or permitted by this law. Whoever is now entitled 
to follow a trade can not, because he does not satisfy the requirements of this 
statute, be excluded therefrom. 

The decisions of the courts have generally succeeded in demon- 
strating that the principles of commercial liberty ore not violated by 
the organization of trade cartels. The various kinds of unions com- 
monly denominated cartels, recognized in this country, are foreign 
and international associations?, communities of interest, associations 
for the purpose of protecting general economic interests, agricultural 
cooperative associations, unions of tradesmen, and coalitions of work- 
ingmen. 



120 



TRUSTS IN FOREIGN COUNTRIES. 



The judicial forms of these organizations are numerous, the ma- 
jority being constituted as limited-liability corporations and many as 
joint-stock companies. Others are confederations of the loosest kind. 
For example, there are 350 manufacturers of felt shoes and slippers, 
550 manufacturers of leather shoes and boots, the most important 
telephone manufacturers, who simply declared publicly that they 
were obliged to advance the prices of their products in consequence of 
the increased cost of raw materials and the increase in cost of pro- 
duction. 

Many cartels are of a local character, or limited to a particular 
region. Such are usually unions of manufacturers whose markets 
are limited to the region affected. 

There are many such cartels composed of manufacturers of cement, 
briquets, and bricks, and of the dairy farmers. Among many of 
these cartels efforts have been made to accomplish the syndication 
of the cartels themeselves. There are a great many Konditions- 
kartelle in which the members agree to adhere to certain terms of 
delivery and sale, the terms of which are laid down in a uniform con- 
tract with which each member binds himself to comply. The con- 
tracts frequently refer to guaranteeing of credits, the manner in 
which payments are to be made, the rates of discount, and whether or 
not sample orders should be charged for or supplied free. 

STATISTICS OF COMBINATIONS. 

The highest degree of syndication in Germany has been reached 
in the mining and iron industries. Although the number of cartels 
existing in these industries is not large, they are mainly well organ- 
ized and very strong; for example, the Rhenish-Westphalian coal 
syndicate in Essen, and the Stahlwerks-Verband, or steel syndicate, 
in Dusseldorf. 

The Imperial German Government issued statistics in 1905 showing 
that there Avere 385 cartels existing at that time in Germany, but these 
figures are said not to contain the Konditionskartelle (those, e. g., 
fixing terms of sale other than prices) and numerous other confedera- 
tions, the existence of which was not then within the knowledge of 
the authorities. When these statistics were made up it was under- 
stood that about 12,000 establishments were members of syndicates. 
The following recapitulation shows the variety of industries covered 
by commercial combinations in 1905 : 

Conl mining: 19 

Stones and earths 27 

Brick industry 132 

En r then ware industry 4 

Glass industry 10 

Iron industry 62 

Metal trade 11 

Machinery, electricity ,. 2 

Chemical industries 46 

Special commissions of the Reichstag studied the subject between 
190;') and 1906, and as a result of the investigation it was not deemed 
necessary, at that time, to formulate legislation of a restrictive char- 
acter. It is probably recognized that restraint of trade is not without 
its grave inconveniences and perhaps dangers, but that in the present 
state of public opinion in this country it would be unwise to destroy 
a system so deeply rooted in the habits of all classes of society. 



Textiles.. 1 31 

Paper industry 6 

Leather trade 6 

Wood industry 15 

Food products 7 

Miscellaneous 7 

Total 385 






THE CAUSES OF TRUSTS AND SOME REMEDIES 

FOR THEM. 1 

By Francis Walker. 

While trusts, or to use a more satisfactory terminology, industrial 
combinations and monopolies, are comparatively recent phenomena 
in our economic life, their vital importance to society and the in- 
dividual has resulted in attracting to them an unusual degree of at- 
tention. The subject itself is a complex one, and the more inten- 
sively it is studied the more difficult it seems to bring all the phenom- 
ena into a brief formula, or to prescribe a general policy by laying 
down a simple rule. It would be impossible to explain in a short 
paper all of the real causes of trusts, many of which have never been 
thoroughly studied, and it would be unprofitable to discuss all of the 
proposed remedies. This paper aims simply at suggesting for dis- 
cussion certain of the chief causes and certain remedies which ap- 
pear to be of special interest to the economist at the present time. 
As far as possible the legal aspect of the question will be omitted 
from consideration, while the economic phases will necessarily be. 
treated in the broadest manner, and, therefore, without exclusive 
reference to our peculiar legal conditions. 

Industrial combinations may be described as associations of orig- 
inally independent makers of, or dealers in, a given class of com- 
modities, established with a view to regulating the production or 
sale of them in a manner more profitable to themselves than that 
which would be determined by free competition. Industrial mo- 
nopolies may be described as particular concerns or combinations of 
concerns which have acquired a more or less complete possession of 
the markets in their respective fields of production or trade. The 
* ; trust " falls in both of these classes, but does not include all the 
types of either of them. 

The causes of combinations and monopolies are various and may 
be classed according to several different principles. In the case of a 
given combination or monopoly it would probably be found on inves- 
tigation that it owed its formation to several causes. While the 
arbitrary determination of the trust promoters or founders is often 
regarded as the cause, there are generally certain conditions existing 
which virtually control their determinations. 

The following headings should be regarded rather as an arrange- 
ment of topics for convenience than a scientific classification. Mo- 
nopolies may be classed according to their chief causes as follows : 

1. Those depending on legal grants, such as patents and franchises. 

2. Those depending on the sole possession of natural resources. 

3. Those depending on rebates or similar special advantages. 

1 Reprinted from the Papers and Proceedings of the Twenty-Second Annual Meeting of 
the American Economic Association. 

121 



122 TRUSTS IN FOREIGN COUNTRIES. 

4. Those depending on unfair competition, such as local price cut- 
ting or preventing competitors from getting supplies and facilities. 

5. Those depending on efficiency superior to all competition. 

6. Those depending on agreements among competitors. 
It is evident that as monopolies may result from combinations, a 

whole train of other causes of monopolies appear, namely, those that 
lead to combinations. Before coming to the causes of combinations, 
however, it may be noted that a number of circumstances which 
afford a basis for monopoly are likewise inducements to combina- 
tions. In order to avoid repetition and confusing in a greater degree 
a subject necessarily complicated, the effects of these conditions 
favoring combination need not be considered any further. Classify- 
ing combinations according to their causes, we may distinguish the 
following chief kinds : 

1. Those induced by bad systems of corporation law, which allow 
undue liberty in the consolidation of corporations, and under which 
there is opportunity given to promoters to make improper gains by 
the issue of watered stocks and by other financial devices. 

2. Those designed to take advantage of a protective customs duty. 

3. Those designed to counterbalance labor unions and to give to 
the employers greater power in bargaining with labor. 

4. Those designed to counterbalance a combination in another 
branch of industry. 

5. Those induced by the destructive effects of excessive competi- 
tion. 

6. Those induced by the opportunity to get control of the market 
and to enhance prices. 

It will be observed that monopolies and combinations, though two 
distinct things, are not mutually exclusive. Some monopolies are 
consolidations or combinations of a less permanent or less integrated 
form. On the other hand, almost any combination may become a 
monopoly under certain conditions. Most of the so-called trusts 
which have a monopolistic power have passed through the stages of 
loose combination to a more or less consolidated form or organization. 

The combinations which are formed in consequence of the effects 
of excessive competition may be often practically necessary, if the 
producers, as a class, are to avoid losing money, and in this sense the 
elimination of competition may be described as natural. The term 
" natural monopoly " is familiar and refers generally to such enter- 
prises as steam railroads, or more especially to municipal enterprises, 
such as street railways, gas works, and waterworks. But these are 
only a few of the enterprises which become noncompetitive from a 
natural cause in the sense the term " natural " is used above. When ' 
the matter is thoroughly analyzed, it results in the conclusion that 
under certain conditions, competition, when effective and unremitting, 
becomes destructive of even the stronger competitors, and thus tends 
either to eliminate all competitors except the one final victor or to 
reduce a comparatively small number of survivors to bankruptcy. It 
may be fairly said that under such circumstances the conditions of 
natural monopoly exist. 

In the popular mind the principal cause of combinations and 
trusts, probably, is the mere chance presented to secure control of the 
market of a particular commodity, either for a brief period or in a 
more permanent way; that is, no particular factor or circumstance 



TRUSTS IN FOREIGN COUNTRIES. 123 

was decisive unless, perhaps, the personal element in the promotors 
of the combination. It is particularly with this type in mind that 
our antitrust laws have been enacted. In this group, which may be 
called the omnibus group, all the combinations not due to specific 
causes already mentioned may be included. Combinations organized 
simply with a view to control prices and without any other hold on 
the trade have generally been characterized by an extravagant price 
policy. The reason for this is that a mere agreement among pro- 
ducers is not likely to last long, and a consolidation of them in any 
case would be likely to develop new competition, so that under such 
circumstances the natural impulse is to make hay while the sun shines. 

Let us return now to the question of natural monopolies. It has 
frequently been observed that one of the most fertile fields for the 
growth of combinations and monopolies is where there exists a 
limited supply of some highly useful gift of nature, such as coal, ore, 
petroleum, timber, water power, etc. 

While it can not be proved statistically, there is good ground for 
believing that in several branches of mining the products, under a 
competitive system of production and sale, often do not on the whole 
repay the producers for their outlay. The people who generally 
make money from such products are those on whose lands the deposits 
are found and who lease them on royalty. Production is encouraged 
in some branches of mining by the speculative profits and maintained 
in others, even though the business as a whole is a losing one, by the 
fact that capital is heavily and irretrievably committed. The con- 
clusion as to the unprofitableness of mining seems to be justified par- 
ticularly by a study of the history of coal mining and iron- ore min- 
ing where the industry is conducted under conditions of free compe- 
tition. As such conditions, in a certain sense, afford a justification 
for combinations, it is important to examine them in some detail. 
Combination in self-defense can hardly be regarded as an assault on 
the public welfare requiring penal correction. 

A good illustration is found in coal mining. At the beginning of 
the exploitation of a coal field, it naturally happened that the pro- 
ducers attacked, at first, comparatively accessible deposits, and con- 
sequently were obliged to apply but little capital, or otherwise commit 
themselves seriously to the continuation of the business. Under such 
circumstances they prospered or failed, continued or abandoned their 
activities, according to the profits obtained. As the business de- 
veloped, however, the coal lands acquired more value, due to the de- 
velopment of the market (or demand), and those who engaged in coal 
mining, or those who had coal lands, found themselves in the position 
of holding something of value, which, however, could yield a return 
only if brought under exploitation. On the other hand, the develop- 
ment of the industry led to the sinking of more capital into mining 
improvements, such as shafts instead of slopes, more elaborate me- 
chanical equipment, etc., either because the coal had to be sought at 
deeper levels, or because such an equipment, when properly utilized, 
resulted in a reduction in the cost per ton of coal mined. In fact, it 
was found that operating costs depended in a large degree on output, 
or how much coal could be taken from a single shaft. This condition 
drove every operator to try to increase his output in order to lower 
his costs. 



124 TRUSTS IN FOREIGN COUNTRIES. 

The inevitable result was overproduction. The market became 
glutted with coal, which so declined in price that it afforded a profit 
to only a few of the best located producers. Many of those who were 
losing money stuck to it because their capital was committed; others 
failed outright and quitted the business. It was quite possible, how- 
ever, for production to be continued in mines in which the cost of pro- 
duction exceeded the market price, particularly if the operating com- 
pany became bankrupt and sold its improvements far below cost. 
The natural growth of demand was the beacon of hope to the mining 
operator, but when the demand did outstrip production, either from 
the natural growth of population and use, or from unusual industrial 
activity, this opportunity was seized on by those who possessed coal 
lands hitherto unexploited, or previously exploited but abandoned, to 
enter the business, so that production and competition in a short time 
became excessive again, and with that, a new period of glutted mar- 
kets and unprofitable business occurred. In such periods of bad 
times, there was no chance to accommodate production to demand 
through a general reduction in output, because as long as the coal 
operator was working on a strictly competitive basis, he could not 
reduce his output without increasing his cost per ton. The extra 
amount of coal produced by him had much less effect in depressing the 
market price than in diminishing his own costs. As long as he could 
not rely on others reducing their output, the most advantageous thing 
for him to do was to increase his own output. Under such circum- 
stances, competition became destructive, cutthroat competition, from 
which the only results could be heavy losses for many, until the ex- 
cessive productive capacity was put out of operation or a new growth 
in demand caught up with the output. 

Concerns which were handicapped by extensive investments in coal 
lands, which could not all be brought into operation at once, because 
there was no market for the coal, being thus burdened with heavy 
carrying charges, were naturally the ones that suffered most in these 
recurring periods of overproduction and glut. As long as lands ad- 
joining theirs, equally available for mining, were not exploited, the 
owners felt themselves deprived of an opportunhvy to earn some- 
thing from them, and often, indeed, where they had purchased them 
with a view to mining, were paying carrying charges on them in hard 
cash. This tended to force such properties, directly or indirectly, 
into the ranks of producers. As such new competition would not be 
welcome, those already in the field, who contemplated continuing so 
indefinitely, would often buy or lease such lands, establishing gradu- 
ally large reserves. As long, however, as free competition persisted, 
and there was a division in the ownership of the coal lands, the price 
of coal could not rise, in a permanent way, very much above the cost 
of mining and would often fall below it. There was no margin, 
therefore, to cover the carrying charges of extensive reserves of coal 
lands. 

These two factors, then, the condition of diminishing cost with 
enlarged output, and the pressure of the owners of unexploited prop- 
erties on those that are engaged in operating mines, both tend irresist- 
ably to overproduction and losses. Such being the condition of the 
industry, the obvious remedy of combination has generally been 
clutched at by the producers, and it is a significant thing that the 



TRUSTS IN FOREIGN COUNTRIES. 125 

agreements among them are from the beginning directed quite as much 
toward the restriction of output as the fixing of prices. The restric- 
tion of output is, in fact, the crux of the whole problem. The in- 
genious way in which this was accomplished in the anthracite coal 
fields of Pennsylvania, by a combination of railroads interested in 
coal mines to limit the railroad shipments from each mine, is a 
matter of common knowledge, and it has been imitated in other parts 
of the country. 

Once, however, combination is achieved, the tendency of the pro- 
ducers, if left to their own devices, is to go to the other extreme, both 
m restricting production and raising prices. There is not much doubt 
that, if all the reserves in our great coal fields and ore fields were 
opened up for operation to anyone who would pay a royalty equal to 
the intrinsic advantage (economic rent) of the mineral rights in 
question, the prices of coal and ore in our most favored producing 
districts would experience a very marked decline, and with them the 
values of the deposits. In other words, the very high prices which 
are demanded in some districts for coal and ore, and for coal and 
ore lands, are dependent, in a large measure, on the establishment of 
very large reserves, as well as the concentration of current produc- 
tion in a comparatively few hands, among which understandings, con- 
cerning the restriction of output, are easily and quietly effected. 

The manufacturing industry does not involve the use of natural 
resources and so does not contain both of these competition- destroy- 
ing tendencies. Possibly there are exceptions to the statement, par- 
ticularly where water-power rights exist — but these only tend to 
emphasize the importance of the differnce. On the other hand, for 
those in the manufacturing business who have already committed 
themselves more or less permanently to a particular branch of it by 
the investment of capital in works, etc., the conditions are to a con- 
siderable extent similar to those surrounding persons engaged in the 
mining business, in so far, that is, as that branch of manufacture is 
a business of diminishing costs. 

Generally speaking, manufactures under the factory system in- 
volve diminishing costs, while those under the household system often 
have nearly constant costs. Diminishing cost is the very raison 
d'etre of the factory in many branches of industry. Wherever there 
are considerable general expenses independent of output, the "bur- 
den expense" that must be added to the prime cost of labor and 
materials will always tend to give diminishing costs with increased 
output. It is a pretty safe assumption that when bonuses are offered 
to workmen for extra large output the object is to take advantage of 
this diminishing cost. One does not need to suspect Carnegie, for 
example, of sporting proclivities in reading of the " records " form- 
erly made at Homestead, or at the Edgar Thomson mills. 

It is interesting to note that to this fact, in connection with exces- 
sive competition, Carnegie himself attributed the development of 
combinations in manufactures. In an article in the North American 
Review in 1889, he wrote as follows: 

It is worth while to inquire into the appearance and growth of trusts and 
learn what environs produce them. Their genesis is as follows: A demand 
exists for a certain article, beyond the capacity of existing works to supply it. 
Prices are high and profits tempting. * * * New partnerships are formed, 
and new works are erected, and before long the demand for the article is fully 



126 TRUSTS IN FOREIGN COUNTRIES. 

satisfied and prices do not advance. In a short time the supply becomes greater 
than the demand, there are a few tons or yards more in the market for sale than 
required, and prices begin to fall. They continue falling until the article is sold 
at cost to the less-favorably situated or less ably-managed factory; and even 
until the best-managed and best-equipped factory is not able to produce the 
article at the prices at which it can be sold. * * * As manufacturing is 
carried on to-day, in enormous establishments with five or ten millions of dollars 
of capital invested, and with thousands of workers, it costs the manufacturer 
much less to run at a loss per ton or per yard than to check his production. 
Stoppage would be serious indeed. The condition of cheap manufacture is run- 
ning full. Twenty sources of expense are fixed charges, many of which stoppage 
would only increase. Therefore the article is produced for months, and in some 
cases that I have known for years, not only without profit or without interest 
upon capital, but to the impairment of the capital invested. * * * It is in 
the soil thus prepared that anything promising relief is gladly welcomed. 

* * * Combinations — syndicates — trusts — they are willing to try anything. 

* * * Such is the genesis of " trusts " in manufactured articles. 

It would take, indeed, a wide knowledge of the technique of many 
branches of manufacture to enable one to express an opinion as to 
the extent to which diminishing costs prevail in the manufacturing 
industry, and a very exact knowledge of a particular branch to 
tell in what degree it prevailed therein. Probably there is no such 
thing, generally speaking, as a final best unit of manufacturing 
plant; it all depends on the volume of business and the improve- 
ments in technique. 

The great significance of diminishing costs in transportation is 
admitted on all sides, and by some who deny its existence in manu- 
factures. 

There is a branch of trade closely connected with both manufac- 
tures and transportation which is coming more and more under the 
influence of this factor, namely, the distribution of commodities. 
Whether the distribution of commodities is affected in an important 
degree by this principle depends chiefly on the technique. It is 
impossible to consider this subject in detail, but it may be pointed 
out that it prevails in the most conspicuous degree in those systems 
of distribution which require elaborate equipments for transporta- 
tion, storage, and sale. A good illustration is found in the fresh- 
meat trade. A successful business to-day requires a large equip- 
ment of refrigerator cars, icing stations, and local " coolers " for 
storage. The plant involves a large expense, which can be borne 
economically only by a large volume of sales. An even better illus- 
tration, perhaps, is found in the sale of illuminating oil. The 
elaborate mechanical equipment used in the bulk distribution of this 
commodity, which includes storage tanks, tank cars, tank ships, tank 
wagons, and in some cases even pipe lines for refined oil, necessarily 
involves an enormous capital expense, which is made economical 
only with a very large volume of business. The cost of distribution 
per gallon diminishes rapidly with the increase in the volume of 
sales. These, like other elaborate methods of distribution, are gen- 
erally calculated to serve more than one end, and to render more 
than one advantage. As means of obtaining a sure market for a 
commodity, as well as means for wresting away the business of 
rivals, they have important uses. The important fact for the present 
discussion, however, is that the distribution of commodities, like the 
manufacture of them, is often subject to diminishing cost with in- 
creased volume of business. This naturally tends to develop exces- 
sive competition, which may become destructive of all but the most 



TRUSTS IN FOREIGN COUNTRIES. 127 

powerful, if the competitors do not come to some agreement. In 
other words, the conditions are present for a natural monopoly. 

It is a much simpler matter to state the causes of combination and 
monopolies than to discover the remedies for them, or for their par- 
ticular abuses or defects. 

Combinations and monopolies may be regarded, on the one hand, 
as things wholly bad, or, on the other hand, as social phenomena 
producing effects in which good and evil are mixed. If the first view 
is adopted, we should seek to abolish combinations, either by direct 
prohibition, or by taking preventive measures looking to the removal 
of all the causes/ If the second view is taken, we must first determine 
what are the evil results of combinations, and then consider what 
methods are best adapted to cure them, whether by removing the 
causes or by applying some antidote to the abuse. While there is a 
good deal of difference of opinion among well-informed and disin- 
terested people as to whether combinations are wholly bad or only 
bad in so far as they produce certain effects, there is naturally a 
general agreement in the opinions as to the bad effects. The prin- 
cipal evils or abuses attributed to combinations appear to be as 
follows : 

1. The exaction of exorbitant prices from consumers. 

2. The depressing of the prices of raw material or the wages of 
labor. 

3. Eebates. 

4. Unfair competition. 

5. Improper and fraudulent practices in the financial conduct of 
corporations. 

6. Engrossing the natural resources of the country, or patented 
inventions, and making the control of them the basis for killing off 
competition, or for an extortionate price policy toward consumers. 

7. Dumping or selling commodities in export markets at lower 
prices than at home. 

Formerly a good deal used to be said of the wastes which combina- 
tions and monopolies were guilty of, but less is heard to-day on this 
matter. This waste used to be attributed to the lack of competitive 
stimulus and the discouragement of small individual enterprises. 
The chief indictment, however, was the destruction or dismantling 
of plants which were found superfluous by the combination. It is 
quite evident, of course, that some of the abuses mentioned above, 
as commonly attributed to combinations and monopolies, exist also 
under conditions of active competition. Price cutting, railroad re- 
bates, watered stock and dumping, for example, are phenomena quite 
as characteristic of the competitive regime as of the monopolistic, 
although such abuses acquire a much graver import in the latter case. 
Exorbitant prices, on the other hand, may be regarded, in tendency, 
at least, as characteristic of the latter. Although selling prices are 
often higher at times under the competitive system, the tendency is 
for the prices under a combination or monopoly to exceed them on 
the average. The abuses of unfair competition also, though fre- 
quently existing to some extent under free competition, are not gen- 
erally of a very harmful character unless practiced by a concern 
with monopolistic powers. So also the engrossing of natural re- 
sources may be carried to a considerable degree by competing con- 
cerns, but this becomes of much more serious consequence when a 



128 TRUSTS IN FOREIGN COUNTRIES. 

combination or monopoly arises. When the process of absorbing 
natural resources has been carried very far, this is apt to be the 
result. 

The first remedy that is ordinarily suggested for almost any kind 
of social abuse is a legal prohibition. If this plan is adopted two 
difficult questions must be answered : First, what is the exact offense 
that the law is to prohibit? second, is a general prohibition of all 
kinds of combination and monopoly capable of enforcement under the 
given conditions of public sentiment and business practice? 

As to this last question, it must be considered that the business 
world generally regards great combinations, whether rightly or 
wrongly, as the natural and necessary development of trade, and de- 
clares in picturesque metaphor that " natural laws can not be repealed 
by statute/' A statute law, of course, is just as much a condition of 
economic development as any other circumstance — it may be an im- 
portant or an unimportant one depending on a good many circum- 
stances, but particularly, in countries with popular government, on 
the degree to which it commands the support of public opinion. It is 
at least doubtful whether the drastic application of some of the 
penalties of our State antitrust laws would be supported by public 
opinion. 

There also appears to be a real difficulty in fixing the definition of 
the offense committed by establishing a combination or monopoly 
which will be satisfactory to the practical economist and the jurist. 
This has been found in Europe, where the legal conditions are much 
simpler than in the United States. Our difficulties are twofold, de- 
pending not only on the nature of the act, but also on our form of 
government. The people of the United States are in a peculiarly 
unfortunate position in attempting to regulate these matters, on 
account of the constitutional limitations of both State and Federal 
Governments. The constitutional limitation on the Federal Govern- 
ment in regard to commerce is an unfortunate historical survival. 
While under the Constitution the power of the Federal Government 
to regulate corporations is often spoken of as being limited to those 
doing an interstate business (and this is the purview of the Sherman 
antitrust law), yet as a matter of fact the power of Congress extends 
to various other subject matters which would give it additional 
powers of control; for example, patents, post roads, etc. What is 
really needed is a revision of the Constitution — a revision upward — 
whereby the organic law of the State, in this as in other respects, 
shall be made to meet the demands of modern industrial civilization 
by providing for the enactment of a general code of commercial and 
corporation law. This, it must be admitted, is at present a counsel 
of perfection. 

The problem of defining the offense of combination or monopoly 
must be left to the lawyer, if a general prohibition is to be the remedy. 
Modifications of the Sherman Act have been proposed in some quar- 
ters, looking to the legalization of reasonable agreements. As is well 
known, the Supreme Court in the Trans-Missouri Freight Associa- 
tion case held that all agreements to fix railroad rates, whether the 
rates so fixed were reasonable or not, were in restraint of trade and 
prohibited. 

Whatever may be thought of the plan for relaxing the severity oi 
our Federal antitrust law, mentioned above, the history of the devel- 



TRUSTS IN FOREIGN COUNTRIES. 129 

opment of combinations and monopolies in the United States seems 
to indicate that a completely satisfactory remedy is not found in 
criminal prohibition. Until some better device is found, however, 
for checking combinations which are clearly obnoxious to the public 
welfare, it is probably better to have an imperfectly designed and 
sporadically applied prohibition than to have no defense at all. Fur- 
thermore, the general position may be taken, that, while great combi- 
nations may afford important advantages in developing and exploit- 
ing natural resources, or in organizing and cheapening the manufac- 
ture and distribution of commodities, and while in particular they 
may give to this country a stronger position in international compe- 
tion than it would otherwise possess, }^et none of these considerations 
is of great weight in comparison with the necessity of preventing one 
class of the community from unfairly oppressing another and of 
compelling all persons and corporations to be obedient to just laws. 

A powerful and untrammeled government could easily abolish com- 
binations or monopolies by a variety of measures without resorting 
to the criminal law, but it would be important to consider whether 
the remedy adopted might not be worse than the disease. Remedies 
for combinations and monopolies should be applied with proper re- 
gard to the abuses and to the causes. Apart from the questionable 
expedient of a simple prohibition, there is no panacea. 

Consideration may now be given to particular remedies. 

1. Where a monopoly is the result of a legal grant, it could in gen- 
eral be abolished by simply repealing the grant (subject, of course, 
to any constitutional limitation) ; or, in any-case, a recurrence thereof 
could be prevented by refraining from making such grants, or mak- 
ing them only under restrictions that would prevent any objection- 
able results. In the case of public franchises, it is already customary 
to limit the term of the privilege, and to exact guaranties for the just 
treatment of the public. A good illustration is found in the system 
sometimes used in fixing the price of gas, whereby the increase of 
dividends is dependent on reductions in price. An easily cured de- 
fect of the patent law of this country appears to be the right of the 
holder to prevent the use of the article absolutely. This right has 
been abused, especially by concerns seeking to establish monopolies. 
In this connection the possibility of controlling combinations 
through patent rights may be noted; for example, Congress might 
restrict the use, purchase, or sale of a patent by a combination or 
monopoly. 

2. The cause for a very important class of monopolies is found 
in the exclusive possession or control of natural resources, of which 
water rights and mineral deposits are perhaps the most important 
examples. The most effective way to prevent monopolies from being 
established in this way is obviously to prevent such property rights 
from being acquired, at least permanently, by any private person or 
company. Where the community has the original title, mere busi- 
ness interest would suggest that grants of such rights without restric- 
tions, or in perpetuity, were wasteful and improvident. In any case, 
in order to prevent possible monopoly and exploitation of the public, 
the State or Federal Government should retain or acquire such rights 
for themeselves, to a certain extent, and eventually allow them to be 
operated by private interests under definite restrictions concerning 
the methods of operation and the conduct of the business, and, in 

67838—12 9 



18€ TRUSTS IN FOREIGN COUNTRIES. 

some cases, by prescribing rates or prices. This is being done already 
in some western States with regard to water rights, but the princi- 
ple is applicable to various natural resources. The constitutional 
[imitations of the Federal Government are more serious here than in 
any other case, and this is particularly regrettable, because individual 

States can hardly he expected to adopt the policy most conducive to 

the welfare of the whole country in instances where their particular 
interests are not identical with it. Pennsylvania, for example, would 
make very little effort to prevent monopoly prices in anthracite coal, 
the hulk of which is sold outside pf the State. In cases where such 
a. policy was deemed impracticable it might he worth while io try the 
remedy, already applied in some German cities, and recently adopted 
in (he English budget, namely, to Levy a tax on the unearned incre- 
ment in value from such natural resources. Or, (he State might, by 
eminent domain, take the reversion of such property after a tixed 

term, say 30 years, paying down now the present value of the rever- 
sion. 

3, Undoubtedly the most prolific, and at the same time the most 
demoralizing, cause oi' monopoly in the United States has been 
favoritism particularly in the railroad rebate or special rate. It 
is important to note that rebates are, to a very Large extent, the re- 
sult of excessive competition, and that with the permission of rail- 
road pooling the chief incentive to this practice would be eradicated. 
Economists have long admitted that this is desirable in conjunction 
with rale regulation, though they have been unwilling generally to 
advocate permitting it in other branches of business, partly because 
they did not always see that the causes tending to combination were 
similar in character, but chiefly because they did not think there 
was any feasible system oi' preventing abuse of such a privilege. 
The rebate is, of course, merely one o( numerous devices intended to 
give one shipper an advantage over another. r I nis is one of the 
causes which should be attacked in the first instance by prohibitory 
legislation and drastic penalties. In order io make such legislation 
effective the most thorough administrative supervision is necessary, 
including the power io examine books and papers, both oi' transpor- 
tation companies and shippers. 

4. Unfair competition may be the cause for the formation of a 
monopoly, as well as the means of maintaining it. This term is an 
elastic one, and includes a variety of practices which may occur 
under a competitive as well as a monopolistic system. Here, again, 
criminal legislation would do much to end the abuses. A prohibition 
o( local price cutting and of bogus independent companies seems 
feasible from (he legal standpoint. The practicability of a law 
against local price cutting is illustrated by the actual Kansas law 
with respect to the sale oi' petroleum, and the legal propriety o( a 
law of this kind has been vouched for by no less an authority than 
the present Secretary of State. Just what form a law against local 
price cutting should take can not be adequately considered here; it 
might be desirable io limit it io cases where prices were cut below 
cost or to eases where the prices were cut with the intention to in- 
jure a competitor, In this case, of course, some rule of evidence 
should be established which would make the law effective. In all 
cases due allowance should be made for differences in cost of trans- 
portation or for differences in manufacturing cost at different points 



TRUSTS in FOREIGN COUNTRIES. 131 

of supply. The chief difficulty with such a Law is in applying it to 
other commodities than staples of commerce, i. e., (<> articles for 
which the measures of quantity and quality are not easily fixed. 
For this reason i( could be successfully applied, perhaps, only to a 
limited Dumber of specific commodities. 

Excluding competitors from obtaining materials, facilities, etc., 
would need more particular analysis and definition than can be given 

the subject here. ( )ne competitor, Tor example, may he such an impor- 
tant purchase or otherwise so influential thai on his demand the seller 
may refuse (o sell (o anyone else. In some lines of business, chiefly, 

if not invariably, where some element of.privilege enters, an obliga- 
tion exists (o supply all would-be customers. Illustrations are found 
in common carriers, warehousemen, innkeepers, companies supplying 
wafer, light, etc. The application of (his rule to business generally 
does not seem advisable, although every case ought to be considered 
on its merits. 'The so-called commodity clause in (he Hepburn Act, 
which aimed to prevent railway companies, in certain cases, from 
producing a commodity which was an important article of freight, 
and in which commodity (hey might, directly or indirectly, assure to 
themselves an unfair advantage over competing producers, is a, good 
example, in purpose at least, of the sort of legislation needed in this 
direction. While common carriers could of course be prohibited 
from denying equal facilities, it would be quite another matter to 
compel combinations which held supplies of natural resources to sell 
them at reasonable prices. On the other hand, where patented ma- 
chines or instruments were controlled by a monopoly, it might be 
required by law to allow the use of them to all under fair terms, 
This might involve some control over the system of rental, where 
that plan is used. The refusal to rent one machine, for example, 
unless others are also taken should be prohibited; otherwise a patent 
which contemplated a monopoly in a new invention might lead to a 
monopoly in things already in common use. 

Certain kinds of exclusive contracts are undoubtedly to be in- 
cluded in the term "unfair competition," and as such should bo 
placed under the ban of the law. This has already been done in some 
States where certain exclusive contracts arc declared to be in re- 
straint of trade. Espionage by corrupting the agents of carriers, 
of competitors, or public employees in order to obtain information 
of a competitor's business and similar practices should be prohibited 
also. Criminal legislation in this respect has been developed much 
further in Europe than in the United States. 

5. Certain monopolies owe their existence, at least in a consider- 
able degree, to superior efficiency. What c;in be done to prevent, such 
a monopoly? A criminal prohibition against efficiency or any at- 
tempt to hamper it unfairly is certainly not to be recommended. 
To let such a monopoly loose on the public and to trust simply to 
potential competition to keep it straight is another answer to the 
problem, but not a ycvv reassuring one under our present conditions 
and laws. Such a combination, if extensive enough, could probably 
by means of local price cutting and other- means of unfair competi- 
tion discourage any would-be competitors and, with a possession of a 
confirmed monopoly, turn and exploit the consumer. Where, how- 
ever, a monopoly rested purely on superior efficiency, without the aid 
of unfair advantages or unfair competition and without the posses- 



132 TRUSTS IN FOREIGN COUNTRIES. 

sion of special franchises or sole control of natural resources, it 
might be allowed to continue in its monopolistic course as a public 
utility, but it should be put under scientific observation as an eco- 
nomic curiosity. 

6. A monopoly may be established simply on the basis of an agree- 
ment among, or consolidation of, all the producers of, or dealers in, a 
commodity. Including consolidations within the meaning of the 
term " combination," it appears at once that the question as to a 
remedy for a monopoly of this kind depends on the question as to the 
remedy or remedies for the various sorts of combinations. 

As combinations are often simply the forerunners of monopolies, 
their causes are often indirectly the causes of monopolies. On the 
other hand, the particular conditions that make monopolies possible 
are often the causes in some degree of combinations. Avoiding all 
repetitions on this account, the remedies for combinations will now 
be considered. 
_ 1. Of our State corporation laws, which encourage the formation 
of combinations by permitting unreasonable and often almost fraud- 
ulent capitalization, as well as a variety of abuses of promotion and 
underwriting, little need be said. There is not much difference of 
opinion as to the desirability and practicability of reform. If laws 
were passed by the States forbidding excessive capitalization and un- 
reasonable contracts with underwriting syndicates, the incentive to, 
and facilities for, organizing trusts would be greatly diminished. 
Stricter rules about holding corporations and the permissibility of 
,one company holding stock in -another would make it possible to pre- 
vent many obnoxious combinations. The real remedy in this respect, 
however, is not to be sought from the State, but from a federal code 
of corporation law and a system of federal corporations. Apart 
from curing the general abuses of corporation law, already referred 
to, the Federal Government could set bounds to the system of promis- 
cuous intercorporate shareholding and also the absolute consolida- 
tion of corporations. In this manner the most important devices for 
forming a present-day trust would be brought under Government 
control. 

2. Some combinations depend on a protective duty. The remedy 
here is suggested by the cause, but, whether it will be regarded as 
worse than the evil intended to be corrected, will depend generally on 
whether the opinion is that of a free trader or protectionist. The 
protectionist's usual objection is, that the abolition of a protective 
duty may indeed destroy a trust in some cases, but that it will also 
destroy the outsiders who are competing with it. The Canadians have 
tried to solve this difficulty by providing that, when the commodity 
protected by a duty comes under the control of a combination, the 
duty on such commodity is revoked. Our most conspicuous and pow- 
erful trusts, with the exception of the Sugar Trust, do not depend to 
any important extent on the tariff. It might be opined in regard to 
the Sugar Trust that, instead of cutting out a useful article of rev- 
enue by abolishing the differential on raw and refined sugar, it would 
be a good thing to levy an internal excise tax to correspond. While 
tariff duties might well be abolished on certain commodities which 
are controlled by monopolies, it would be preferable, as a rule, to 
have this done by law rather than by administrative action. In any 
case, only grave injury to the public welfare should be the basis of 



TKUSTS IN FOREIGN COUNTRIES. 133 

changing the customs duties, when once they are properly adjusted to 
the national welfare and national industry. 

The bounty system of protection, while it has distinct theoretical 
advantages iii some respects, is not generally favored, but it may be 
noted in this connection that it possesses the peculiar advantage that 
it may be withdrawn from the offending combination without injury 
to (indeed to the advantage of) the innocent outsider. 

3. Combinations are sometimes called into existence to oppose 
trade-unions. In olden times the English law forbade workingmen 
to combine in order to obtain better terms of employment. Such 
an act was termed a conspiracy. To-day the laws of the land permit 
to workingmen an unfettered right of combination, but deny the 
same to the employers. The remedy for combinations among em- 
ployers is not to be sought, however, in the prevention of combina- 
tions among laborers. The reasons of public policy which have led 
to the repeal of laws against workingmen's combinations are too 
broad in scope to be affected by their occasional relation to em- 
ployers' combinations. 

4. For combinations established to counteract other combinations 
it is evident that a remedy aiming to remove the cause would be 
found only in a general remedy for combinations, which, in that case, 
would cure both cause and effect. 

5. Combinations may arise from excessive competition. The only 
way to prevent such excessive competition would appear to be in 
restricting it by limiting the output or sales of each competitor, by 
fixing prices, or by some similar device. This, however, is just 
what combinations themselves aim at. In other words, the only cure 
for the cause is the thing to be prevented. Hence, combination estab- 
lished by the State is, strictly speaking, not a solution of the problem. 
Such a plan has already been tried in Austria-Hungary in connec- 
tion with the sugar industry, and in some other instances. 

6. Where a combination is formed simply because an opportunity 
presents itself to control output and raise prices without any of the 
special causes of combinations already enumerated there naturally 
does not appear to be any single peculiar remedy, because the cir- 
cumstances which make such a course of action feasible are gen- 
erally various and complex. It is impossible, practically speaking, 
to try to discover or anticipate all the conditions or circumstances 
which may induce combinations. There must be, therefore, a resid- 
ual class of combinations for which a general remedy is available. 
One remedy for this kind of combination would be that of the 
French law, which prohibits such combinations as result in giving to 
a commodity a price other than that which would result from free 
competition. As interpreted by the courts, this is a prohibition of 
such combinations as charge unreasonable prices. A criminal law, 
however, which has to be applied by tedious judicial processes is not 
a very satisfactory remedy for such abuses. 

In considering the means of doing away with combinations and 
monopolies by eradicating the causes, we have already had occasion 
to note various abuses, which are causes as well as effects of such or- 
ganizations. Particularly, we have considered the problems of 
unfair competition, promotion abuses, the engrossing of natural re- 
sources, and the means of preventing them. These are not really 
abuses which are peculiar to combinations. The same is true of 



134 TRUSTS IN FOREIGN COUNTRIES. 

dumping. The discussion of a remedy for this practice would take 
us too far, but it might be prohibited like local price discrimination, 
although the principles at the base of it are not the same. The 
principal abuse, however — namely, price extortion — is one that has 
still to be considered. Avoiding the direct regulation of prices, the 
effort has been made to reach a remedy indirectly by the application 
of the principle involved in the prohibition of usury. But as usury 
laws are seldom convenient in business affairs, so a similar limita- 
tion in respect to the prices of commodities, apart from those fur- 
nished by public municipal utilities, common carriers, and analogous 
enterprises, would not prove very practicable. In both cases, how- 
ever, greater police power over petty dealings with the poorest classes 
might be beneficial. The remedy for this abuse is, in a certain sense, 
an answer to the whole problem, and it must be found in the remedy 
for those classes of combinations and monopolies which can not be 
corrected by the application of measures devised to remove the 
particular causes, or intended to neutralize them. 

Our analysis thus far, as just intimated, has resulted in the con- 
clusion that, while a number of the important causes of combination 
or monopoly may be removed by specific remedies, there is a number 
of causes for which no such remedy seems to be available. Of these 
classes of combinations requiring some general remedy, two are of 
special importance — first, those combinations which are induced by 
excessive competition, and, second, those which can not be ascribed 
to any special cause or set of causes, but result from an opportunity 
to make an extra profit in that -manner. Practically these two classes 
may not be easily distinguishable, but they are really quite distinct, 
both in cause and purpose. 

The problem is to find a remedy for the necessities of industry 
without laying the public open to extortion — how on the one hand 
to allow the producers to combine when necessary to prevent cut- 
throat competition, and, on the other hand, to prevent them from 
exploiting the consumer by charging excessively high prices. 

The trusts have grown so large and have become so accustomed 
to the exercise of extensive and arbitrary power that remedies of 
publicity and moral suasion, which might have been of considerable, 
effect if applied at the beginning, can not be wholly relied on. What 
is necessary is a real and effective control. 

The first obvious idea would be to permit such combinations as 
were deemed necessary, but to establish some sort of a control over 
prices. Time does not permit a discussion of the merits or possi- 
bilities of this method. While we have already come to accept the 
power of the Government to fix rates for the services of various 
municipal utilities, and even of the railway, the application of the 
same system to all lines of monopolistic industry does not seem de- 
sirable. The greatest difficulties are not those connected with a good 
understanding of the market, although the business man is apt to 
talk of these matters as great mysteries. The great combinations in 
recent years have prided themselves on keeping their prices un- 
changed during very great changes in productive activity and in 
general market conditions, and even when the country was in the 
throes of a panic. But while the fixing of reasonable prices for coal, 
rails, illuminating oil, plug tobacco, or even fresh beef, is probably 
a much simpler matter than the determination of reasonable railway 
rates, the need for doing so is not the same. If necessary, the State 



TRUSTS IN FOREIGN COUNTRIES." 135 

could at the present day take over the operation of the railroads. 
For the direction of industry as a whole, however, the State is not 
ready, and no man can see far enough into the future to be sure that 
it ever will be. 

Another answer to the problem would be for the Government to 
become a partner in the counsels, if not in the business, of the combi- 
nation. A vote in the board of directors and an insight into the most 
intimate affairs of the combination would undoubtedly greatly 
strengthen the Government's control, if the right sort of men could 
be obtained, but this device seems difficult and dangerous. 

Allied to this idea is the proposal that the Government should enter 
certain branches of industry to a limited degree, and, by becoming a 
factor in the business, exercise a moderating influence. This system 
prevails to some extent in Germany, particularly in the mining of 
coal and of potash. It is doubtful whether such a policy is worth 
while if the object is merely price regulation. Where the conserva- 
tion of natural resources is at stake, or the preservation of public 
security is affected, such action might be recommended. 

A better solution would seem to be to permit certain combinations, 
but to limit profits. This is an old-fashioned remedy which has gone 
out of favor. One reason for this undoubtedly was the fact that 
adequate methods were not applied for its strict enforcement. A 
scheme which would appear to be worthy of consideration may be 
briefly outlined as follows: 

Let such combinations as are licensed to do business be taxed at a 
rapidly progressive rate on their net profits above an exempted mini- 
mum — say 10 per cent of the net investment. The tax should be sub- 
stantial from the beginning, say 10 per cent on the profits exceeding 
10 per cent, but not exceeding 11 per cent; 15 per cent on the profits 
exceeding 11 per cent, but not exceeding 12 per cent, the tax rate 
increasing thereafter in like manner by 5 per cent on every 1 per 
cent increase in the rate of profit. On this basis the maximum profit 
retained by the corporation would be about 20 per cent, under which 
condition the State would get about 10 per cent. 

Obviously the chief difficulty would be to determine the net invest- 
ment. The subject is too large for a proper discussion here. Whether 
the cost of the property in question or a physical valuation of it 
should be taken, or whether tabula rasa should be made of past 
offenses, and present book values used as a starting point, would make 
little difference in the long run. If proper bookkeeping methods 
were imposed on all companies, any inequalities in assessment exist- 
ing at present would be comparatively unimportant quantities 20 
years from now. If the companies in question were obliged to come 
to an understanding with the Government on this subject before 
doing business under such a license, it seems likely that even now a 
reasonably fair valuation could be agreed upon without great expense 
or loss of time. 

This plan, on the one hand, would leave to private interests the 
task of fixing prices, with sufficient incentive to strive for a profit, 
and. on the other hand, would set a limit to the exploitation of the 
public. It involves the recognition of combination as lawful in cer- 
tain cases. This might be made by the grant of Federal incorpora- 
tion or the issue of a license. Such a license would confer, of course, 
no monopoly. Probably it would involve to some extent administra- 



136 TRUSTS IN FOREIGN COUNTRIES. 

tive discretion, guided, of course, by established general regulations 
and laws. For the purpose of carrying out the law, a special organ 
of administration would be necessary. This organ should have not 
only the supervision of the Federal law concerning combinations, 
monopolies, and Federal corporations, but also act as a licensing, 
tax collecting, and publicity office. 

The various positive measures for the control of combinations and 
monopolies which have been mentioned or discussed do not exhaust 
the subject by any means, but indicate in a general way what might 
be done if a thoroughgoing system of control was planned. Resumed 
in brief they are : 

1. Restrictions in the grants and uses of patents and franchises. 

2. Conservation and control of natural resources, including taxes 
on unearned increment. 

3. Prevention of discriminations in transportation. 

4. Prohibition of unfair methods of competition. 

5. Provision for abolition or suspension of customs duties in cer- 
tain cases, or for the establishment of corresponding excise duties. 

6. Establishment of a system of Federal corporations under strict 
control both as to management and consolidation. 

7. Prohibition of unlicensed agreements or consolidations. 

8. Establishment of a system for Federal license and taxation of 
combinations. 

9. Establishment of an administrative organ to supervise and 
enforce the laws, and to act as an agent of publicity. 

In conclusion, it may be pointed out that if all these remedies were 
adopted and put into effect there would still remain questions of 
policy in the administration of the laws which would be of vast 
importance to the welfare of the country. For example, the Gov- 
ernment would have to take a stand on the broad question as to 
how far it would permit concentration in industry. The adoption 
of a very thoroughgoing system of control does not commit the 
administration of the law to destructive, iconoclastic methods. It 
merely insures the supremacy of general welfare over particular 
private interests. The establishment of powerful concerns, which 
virtually acquired possession of the whole market, if they owed their 
position to superior efficiency, without the aid of natural resources 
or facilities not open to all competitors, and if they pursued a fair 
business policy toward all competitors and consumers, would not 
be necessarily regarded as objectionable. 

The general ideas at the basis of this scheme of control may be 
briefly summarized as follows: First, to remove all the conditions 
which impede free competition, or facilitate combination or mo- 
nopoly; second, in those cases where free competition becomes 
destructive to allow the producers to combine, with safeguards for 
the public interest. It is not believed that the circumstances under 
which the licensing of combinations is contemplated would be a 
great temptation to those who did not really suffer from excessive 
competition. With a system of Federal corporations and Federal 
taxation and supervision of corporations, combinations by consoli- 
dation could be made impossible, and secret unlicensed agreements 
could be made ineffective, as well as dangerous, to those who attempted 
them. 



GREAT BRITAIN-COMPANIES (CONSOLIDATION) ACT 

1908 



DIGEST OF PROVISIONS IN RESPECT TO THE 
POWERS AND DUTIES OF THE BOARD OF 
TRADE IN CONNECTION WITH THE ADMINIS- 
TRATION OF THE ACT, PUBLICITY OF CORPO- 
RATE AFFAIRS, AND PENALTIES 
OUTLINE OF HISTORY AND ORGANIZATION OF 
THE BOARD OF TRADE 



137 



GREAT BRITAIN COMPANIES CONSOLIDATION ACT 



The interests of the trading public in England, as represented by 
consumers and dealers, have not been the subject of special legislation 
(except in the ancient statutes covering the cases of badgering, en- 
grossing, forestalling, and regrating). Combinations in restraint of 
trade are prima facie void and not illegal; no statute in force makes 
them criminal, and the policy of the law, as at present declared by the 
legislature, is against all fetters on combination and competition 
unaccompanied by violence or fraud or other like injurious acts. 

The common law and the statutes with reference to badgering, fore- 
stalling, regrating, and engrossing declared that certain large oper- 
ations in goods which interfered with the ordinary course of trade 
were injurious to the public, and they were held criminal accordingly, 
but the penal statutes were repealed by 12 George III (c. 71), and the 
common law was left unaided. By 7 and 8 Victoria (c. 24) the com- 
mon law in respect to badgering, engrossing, forestalling, and regrat- 
ing was expressly repealed, with a proviso to the effect that the act 
should not apply to the offense of knowingly and fraudulently spread- 
ing or conspiring to spread false rumors with intent to affect the prices 
of goods or merchandise, nor to the offense of preventing or endeavor- 
ing to prevent, by force or threats, goods or merchandise being- 
brought to market. 1 

On the other hand, the interests of the trading public, from the 
standpoint of investors and creditors, have been the subject of careful 
consideration and considerable legislation, and incidentally some of 
the abuses often charged to industrial combinations, such as over- 
capitalization and its results, have in a measure been corrected by the 
publicity given to corporate affairs. 

The subject of company-law reform was investigated in 1894 by a 
departmental committee composed of members of Parliament, judges, 
prominent lawyers, and merchants, who, after considering the com- 
ments and suggestions of commercial bodies throughout the country, 
framed a bill which was introduced in 1894. This occupied the atten- 
tion of the House of Lords until 1900, when it was finally passed, 
considerably modified, but very much on the original lines. 

The purposes of the legislation and the condition which led to its 
adoption, as shown by the report of the committee in 1895, the annual 
reports of the board of trade, and Parliamentary debates, are briefly 
indicated below. 

It was generally conceded that the vast majority of corporations 
were honestly formed for the purpose of engaging in legitimate busi- 
ness, and that the facilities offered by the companies act of 1862 ( the 
first great corporation act) for the formation of companies with 
limited liability greatly extended British trade and attracted a great 

i Mogul S. S. Co. v. McGregor, 23 Q. B. D. (1SS9), 629. 

139 



140 TRUSTS IN FOREIGN COUNTRIES. 

amount of foreign capital, but it was generally acknowledged that 
certain abuses of public confidence- which did not exist prior to this 
act, and which would have been practically impossible in the case 
of individuals or private partnerships, had developed to such an ex- 
tent as to warrant the consideration of new legislation with a view 
to their 'correction. 

The problem before Parliament was, on one hand, the protection of 
the large body of the public represented in investors and creditors, 
and, on the other hand, to avoid restricting unduly the facilities for 
the creation and development of corporations, which had contributed 
so largely to the prosperity of the country, and needlessly embarrass- 
ing their administration. 

Instead of adopting arbitrary rules which in some cases might 
effectively prevent an abuse but in others seriously interfere with the 
prosecution of legitimate business, it was deemed sufficient, for the 
time being at least, to provide for a certain amount of publicity in 
corporate affairs, enforcing those requirments by penalties, imposed 
in many cases upon the individuals who knowingly and willfully 
disregarded them. 

The necessity for publicity, and its effect, can best be shown by a 
few typical cases. 

A frequent cause of failure and the resulting loss to stockholders 
and creditors was the so-called " loading " of the purchase price of 
property acquired by a new corporation. An option to purchase a 
business frequently passed through a number of vendors, the price 
being increased with each successive sale. It was pointed out that 
there was no objection to this provided that it was done openly. If 
the persons invited to subscribe to the new company were informed 
that they would purchase the property at, say, twice the amount the. 
real and present owner was willing to sell it for, and they cared to 
invest in such an undertaking, it was their own affair. 

The law now provides that a prospectus, which it defines as any 
notice, circular, advertisement, or other invitation, offering to the 
public for subscription or purchase any shares or debentures of a 
company, must be filed with the registrar of companies, and must 
show (1) the names and addresses of the vendors, and where there is 
more than one separate vendor, or the company is a subpurchaser, 
the amount pa}^able to each vendor; (2) the particulars and the 
nature and extent of the interest of everj^ director in the promotion of. 
or property to be acquired by, the company; (3) the dates of and 
parties to every material contract, and a reasonable time and place 
for the inspection of such contracts; and further, that a company 
which does not issue a prospectus shall not allot any shares or deben- 
tures until a statement in lieu of a prospectus has been filed. A 
person is deemed a vendor who has entered into any contract. 
absolute or conditional, for the sale or purchase, or for any option of 
purchase, of any property to be acquired by the company. 

The purpose of the legislation is to disclose the real vendor, the 
real purchase price, and who is profiting by the promotion. 

Another frequent cause of disaster in England, as shown by the 
reports of the board of trade, was proceeding to allotment of shares 
with insufficient subscriptions, often merely for the purpose of pay- 
ing the preliminary expenses. While it was deemed impracticable 
to fix a proportion of the capital to be subscribed before allotment, 



TRUSTS IX FOREIGN COUNTRIES. 141 

owing to the varying circumstances of each case, the law provides 
that the minimum amount upon which a company offering shares to 
the public may proceed to issue stock must be fixed by the memo- 
randum or articles of association and named in the prospectus, in 
default of which the entire capital offered for subscription must be 
taken. The subscriber is thus given an opportunity of forming his 
own judgment as to the immediate prospects of the company. 

Another serious cause of complaint sought to be corrected by 
publicity was in connection with debentures and mortgages. A man 
owning a declining business could incorporate, taking debentures or 
a mortgage from the company in payment for his property, thus 
becoming his own secured creditor. In case of failure, not only the 
creditors but the stockholders suffered, because he held practically 
all the assets. 

The inadequacy of the partial publicity required by the earlier 
acts was shown by cases of intending creditors, who, from their ex- 
amination of the records, were informed that there was a large 
amount of uncalled capital due, often from a list of substantial stock- 
holders. They were unaware of a mortgage on the uncalled capital, 1 
and. extending credit under such circumstances, they assumed a risk 
they possibly would not have considered if they had been fully in- 
formed. The law now provides that particulars of all mortgages, 
debentures, and charges shall be filed with the registrar of com- 
panies and shall be open to public inspection. While it was fully 
realized that legislation could not protect the public from the results 
of their own recklessness, it was considered proper that corporations 
should supply the inquiring investor or creditor with information 
sufficient at least to enable him to form a judgment, and that pub- 
licity as to financial status was a just and necessary condition to at- 
tach to the privilege of limited liability. Again, the disclosures 
required in many particulars are really no more than those due from 
persons acting in a fiduciary capacity, and while the underlying 
principles have long been recognized by courts of law and equity, 
they have frequently been overlooked by persons engaged in the pro- 
motion of corporations. The application of certain of these prin- 
ciples by the companies act tends not only to protect the public, but 
to bring home to promotors and directors a sense of their obligations 
and to shareholders the standards of commercial morality which they 
have a right to expect from persons whom they have been invited to 
trust. 

One important feature of the act is that certain conditions made 
possible by secrecy are prevented, and that an unsatisfactory financial 
condition of the company is made apparent to the creditors and stock- 
holders in time for them to take such action as seems necessary be- 
fore the assets are further diminished. 

It was pointed out in Parliament that the existing methods of re- 
dress by means of criminal actions were unsatisfactory because of 
the great indisposition to resort to criminal procedure and the ten- 
dency of juries to acquit for doing what was only a common practice. 
In addition it was necessary to be reasonably certain that there was 
sufficient evidence, and in some cases it was extremely difficult to 
secure it, while there might be little doubt that gross frauds had been 

1 Under the English law the uncalled capital may be mortgaged If authorized by the 
memorandum and articles. 



142 TRUSTS IX FOREIGN COUNTRIES. 

committed. Civil actions were attended with considerable difficulty 
and heavy expense. 

It is apparent from the foregoing that in order to give effect to 
certain provisions of the companies acts an administrative office was 
required. The duties were imposed upon the board of trade, and 
some of the most important will be noted hereafter. 

A digest of the provisions of the act of 1908 in respect of (1) the 
classification of companies, (2) the powers and duties of the board of 
trade in connection with the administration of the act, accompanied 
by extracts from the annual reports of the board, (3) information 
available to the public, (4) the penalties for the enforcement of the 
act, and an outline of the history and organization of the board of 
trade are appended hereto. 

CLASSIFICATION OF COMPANIES. 

The English law has classified companies (1) in respect of the 
liability of members, (2) in respect of their organization and relation 
to the public. 

IN RESPECT OF LIABILITY OF MEMBERS. 

(a) Companies " limited by shares," defined as companies having 
the liability of their members limited by the memorandum to the 
amount, if any, unpaid on the shares respectively held by them. 

(b) Companies "limited by guarantee," the liabilities of the mem- 
bers being limited by the memorandum of association to such amount 
as the members may respectively undertake to contribute to the 
assets of the company in the event of its being wound up. 

(c) " Unlimited companies," the members of which have no limit to 
their liability. There are comparatively few companies of this class. 

Unless otherwise noted, the provisions of the act hereafter referred 
to relate generally to companies " limited by shares." 

IN RESPECT OF ORGANIZATION AND RELATION TO THE PUBLIC. 

(a) "Private companies," which are defined as those which by 
their articles restrict the right to transfer shares, limit their mem- 
bership to not more than 50 (exclusive of persons employed by the 
company), and prohibit any invitation to the public to subscribe for 
any shares or debentures. 

\~b) "Public companies," which include all other than private, and 
which are chiefly considered hereafter. 

The most important distinctions between public and private com- 
panies are as follows: 

(a) A private company may be formed by two persons, while a 
public company requires seven. 

(b) The preliminary requirements are fewer in the case of private 
companies. The certificate of incorporation is granted upon the de- 
livery to the registrar of companies of the memorandum and articles 
of association, whereas other companies can not commence business 
without compliance with a series of preliminary conditions, includ- 
ing the registration of a prospectus or a statement in lieu thereof. 

(c) An annual audited balance sheet, summarizing the capital, 
liabilities, and assets of the company, is required from a public com- 
pany, but not from a private company. 1 

1 Companies (consolidation) act 1908, sec. 26. 



TRUSTS IN FOREIGN COUNTRIES. 143 

(d) Private companies are not required to file with the registrar 
a copy of a detailed report as to the position of the company which 
is sent to members before its first or " statutory " meeting. 1 

(e) Private companies are exempt from the provisions of the act 
permitting the inspection of balance sheets, auditor's and other 
reports by holders of debentures and preference shares. 2 

POWERS AND DUTIES OF THE BOARD OF TRADE IN RESPECT TO THE ADMIN- 
ISTRATION OF THE COMPANIES (CONSOLIDATION) ACT 19 8. 

While most of the duties imposed upon the board of trade by this 
act are in connection with the dissolution of companies, there are some 
powers which may be exercised under certain circumstances over 
going concerns. 

Inspection. — Perhaps the most important, at least in theory, is 
that of inspection of the affairs of a company at the request of its 
stockholders. 3 This power of inspection, however, has been very 
rarely used. 4 The inspectors appointed by the board have access to 
all the books and documents of the company and may examine its 
officers and agents under oath, rendering, finally, a report to the 
board of trade. Copies of this report are, upon request, furnished 
to the applicants for the examination, and, when properly authenti- 
cated, are admissible in any legal proceeding as evidence of the 
opinion of the inspectors in relation to any matters therein contained. 

Abuse of this privilege is prevented by a provision that the applica- 
tion shall be by persons holding not less than one-tenth of the shares 
issued, and by a requirement of the board of trade that the appli- 
cation shall be supported by evidence of the good faith of the 
applicants, and that they have good reason for demanding the in- 
vestigation. The board may, in addition, require the applicants 
to secure the costs of the investigation, which must be defrayed by 
them unless, in the discretion of the board, they should be borne by 
the company. 

Audit. — Upon the application of any stockholder the board of 
trade may appoint auditors for any company upon its failure to do 
so at its annual meeting. 5 

The regular audit of accounts, though usually provided for in the 
articles of a company, was considered by Parliament to be too im- 
portant to stockholders and the public to be left to a voluntary 
arrangement. The appointment of auditors by the board of trade, 
upon the application of a stockholder, is provided for extending the 
principle adopted in regard to banking companies in the companies 
act 1879. 6 The auditors have access to all books and are required to 
report to the stockholders, on the accounts examined by them, which 
report shall state whether they have obtained all information and 
explanations required by them, and whether in their opinion the 
balance sheets submitted in general meeting exhibit a correct view 
of the company's affairs. 

1 Companies (consolidation) act 1908, sec. 65. 

2 Companies (consolidation) act 1908, sec. 114. 
•Companies (consolidation) act 1908, sec. 109. 
4 Palmer's Company Law (7th ed.), p. 220. 
'Companies (consolidation) act 1908, sees. 112-113. 
•Palmer's Company Law (7th ed.), p. 221. 



144 TRUSTS IN FOREIGN COUNTRIES. 

Payment of interest out of capital. — Where any shares are issued 
to raise money for the construction of any works, buildings, or plant 
which can not be made profitable for a lengthened period, the company 
may pay interest on so much of that share capital as is for the time 
being paid up, provided that it is authorized by the articles or special 
resolution, and, further, that it is sanctioned by the board of trade, 
which may investigate the circumstances at the expense of the com- 
pany and the payments may continue only for such portion of the 
time limited by the act as the board may determine, but in no case 
shall the rate of interest exceed 4 per cent per annum or such lower 
rate as may be prescribed by order in council. 1 

Articles of association. — The act requires the articles of associa- 
tion to be registered and provides that in the absence of articles 
adopted by the company, or in so far as filed articles do not exclude 
or modify model articles appended to the act, such model articles 
shall constitute the articles of the company. 2 

The board of trade may alter or add to these statutory articles, 
which alterations or additions will thereafter have the force of law ; 
the changes, however, not affecting companies previously registered. 3 

Change of name. — A company may, by special resolution, change 
its name, but only with the consent of the board of trade. 4 

The board has authority to establish registration offices, make 
regulations as to the performance of the duties of the registrar, and 
to prescribe fees for the inspection or copies of the records of the 
registrar, not exceeding the maximum prescribed by the act. 5 

Other duties in connection with going concerns, but more minis- 
terial in character, such as issuing certificates of incorporation, the 
registration of such documents as the act requires to be published, 
etc., have been imposed upon the board. 

WINDING UP AND REMOVAL FROM REGISTER. 

A company once incorporated can not be dissolved except by com- 
pliance with the provisions of the act, or by removal from the register 
as a defunct company. 

The grounds on which a winding-up order may be made by the 
court are: 

(a) If the company has by special resolution resolved that the 
company be wound up by the court; 

(b) If default is made in filing the statutory report or in holding 
the statutory meeting; 

(c) If the company does not commence its business for a whole 
year ; 

(d) If the number of members is reduced, in the case of a private 
company, below two, or, in the case of any other company, below 
seven ; 

(e) If the company is unable to pays its debts; 

(/) If the court is of the opinion that it is just and equitable that 
the company should be wound up. 6 

Just what " just and equitable " means is, of course, impossible to 
define, but winding-up orders have been made on the ground that the 

i Companies (consolidation) act 1908, act 1908, sec. 91. 

2 Companies (consolidation) act 1908, sees. 10 and 11. 

"Companies (consolidation) act 1908, sec. 118. 

* Companies (consolidation) act 1908, sec. 8 (3). 

•Companies (consolidation) act 1908, sec. 243 (1), (2). 

•Companies (consolidation) act 1908, sec 129. 



TRUSTS IN FOREIGN COUNTRIES. 



145 



substratum of the company was gone, 1 that the company was a bub- 
ble, 2 and that the company was conceived and brought forth in fraud. 3 

The winding-up order once having been issued by the court, how- 
ever, the board of trade is charged with many important duties. 

When it became necessary to appoint a receiver, the official receiver 
attached to the court for bankruptcy purposes shall be appointed, or, 
if there is more than one, such one of them as the board of trade may 
select, and in the absence of any official receiver the board may ap- 
point an officer for the purpose. 4 

A receiver thus appointed shall submit a preliminary report to 
the court, stating the amount of capital issued, subscribed, and paid 
up; the estimated amount of assets and liabilities; the causes of 
failure; his opinion whether further investigation in regard to the 
promotion, formation, or failure of the company or the conduct of 
the business is desirable, and may report further whether in his 
opinion any fraud has been committed and mention any other mat- 
ters desirable to be brought to the attention of the court. 5 

If the receiver further reports that in his opinion fraud has been 
committed in the promotion of the company, or by any director or 
officer since its formation, the court may publicly examine such 
person or persons on oath, and the receiver and liquidator (if any) 
may take part in such examination. Notes of the examination shall 
be reduced to writing, signed by the person examined, and may be 
used in evidence against him, and shall be open to the inspection of 
any creditor or contributory. 6 

The public examination provided for in this section was introduced 
into the company laws as section 8 of the director's liability act, 1890, 
and was at first largely resorted to, but its operation was considerably 
curtailed by a decision of the House of Lords in 1896, holding that 
no order for public examination of a particular person can be made 
unless the official receiver expresses the opinion that such person has 
been guilty of fraud and shows how he is connected with the facts. 7 

The provision has, notwithstanding this limitation, been availed of 
in a number of cases, as shown by the following table : 



Public examinations. 



Year. 


Winding- 
up orders. 


Number of 
companies 
in which 
examina- 
tion 
ordered. 


Number of 

persons 
examined. 


1902 


112 
83 
98 
89 
116 
108 
126 
146 
135 


10 

16 
7 

11 
8 

10 
9 
9 
6 


15 
50 
25 
33 
16 
24 
28 
18 
•11 


1903 


1904 


1905 


1906 


1907 


1908 


1909 


1910 





i German Date Coffee Co., 20 C D., 169 ; Red Rock Gold Mining Co., 61 L. T.. 785 

2 London & County Coal Co., 3 Eq., 355. 

•J. E. Brinsmead & Sons (1897), 1 Ch. 45, 1 Ch. 406 (Appeal). 

* Companies (consolidation) act 1908, sec. 146. 
•Companies (consolidation) act 1908, sec. 148. 
•Companies (consolidation) act 1908, sec. 175. 

1 Ch\f- Tte Barnes ( 1906 )» A - c - 146 - Ciyil » Naval, and Military Outfitters (1899>, 

• Reports, Board of Trade, 1902-1910. 



67838—12- 



-10 



146 TKUSTS IN FOKEIGN COUNTKIES. 

Where, in the course of winding up a company, it appears that any 
person taking part in the formation or promotion of the company, 
or any past or present director, manager, liquidator, or officer has 
misapplied any funds, or has been guilty of breach of trust, the 
court may, upon the application of the official receiver, liquidator, or 
any creditor or contributory, examine into the conduct of the person 
complained of and compel him to restore any such money or property 
to the company, and the order shall be deemed a final judgment. 1 

The receiver shall call separate meetings of creditors and con- 
tributories to determine whether an application shall be made to the 
court for appointing a liquidator in the place of the official receiver 
and determining whether application is to be made for the appoint- 
ment of a committee of inspection consisting of creditors and con- 
tributories to act with the liquidator. 2 

Where the official receiver becomes the liquidator of a company he 
may, in his discretion, apply to the court for the appointment of a 
special manager with such powers and for such time as the court may 
direct, and the special manager so appointed shall give such security 
and account in such manner as the board may direct. 3 

An account called the " Companies liquidation account " shall be 
kept by the board of trade with the Bank of England, and all moneys 
received by the board in respect of proceedings under this act in con- 
nection with the winding up of companies in England shall be paid 
to that account. 4 

Whenever the balance of this general account is in excess of the 
immediate requirements of the board, it may be invested in Govern- 
ment securities, and the dividends shall be considered in fixing fees 
payable in winding-up proceedings. 5 

When the committee of inspection deems the balance to the credit 
of the company to be in excess of immediate requirements, the board 
shall invest the excess in Government securities, and credit the 
dividends to the company. 6 

When the balance to the credit of any company's account with the 
board of trade exceeds £2,000, and the liquidator notifies the board 
that the excess is not required, the company shall be entitled to 2 per 
cent interest on the excess. 6 

Every liquidator shall, at least twice a year, render to the board of 
trade an account of his receipts and payments, which shall be audited 
by the board, summarized, and sent to creditors and. contributories, a 
copy being retained by the board for the inspection of any person 
interested. 7 

The board may direct a local investigation into the books and 
vouchers of the liquidator, and may, in its discretion, apply to the 
court to examine him or any other person on oath concerning the 
wind-up of any company. 8 

The board shall take cognizance of the conduct of liquidators of 
companies being wound up by the court, and, if they do not observe 
the requirements imposed upon them by the statute or rules, or a 

1 Companies (consolidation) act 1908, sec. 215. 

2 Companies (consolidation) act 11)08, sees. 152, 160. 
8 Companies (consolidation) act 1908, sec. 161. 
♦Companies (consolidation) act 1908, sec. 229. 

6 Companies (consolidation) act 1908, sec. 230. 

6 Companies (consolidation) act 1908, sec. 231. 

7 Companies (consolidation) act 1908, sec. 155. 

8 Companies (consolidation) act 1908, sec. 159. 



TRUSTS IX FOREIGN COUNTRIES. 147 

complaint is made by any creditor or contributory, the board shall 
inquire into the matter and take such action as it may think expe- 
dient. 1 

Upon the conclusion of his duties the liquidator shall report to the 
board of trade, and after consideration of the report and any objec- 
tion urged against his release by a creditor or contributory the board 
shall grant or withhold his release accordingly, subject to an appeal 
to the high court. 2 

An order of the board of trade releasing the liquidator shall dis- 
charge him from all liability, but may be revoked on proof that it 
was obtained by fraud or by suppression of any material fact. 3 

In the absence of a committee of inspection appointed to act with 
the liquidator, the board of trade may do any act that the committee 
might do under the act. Under the rules of the board of trade the 
committee of inspection, consisting of creditors and contributories, 
assists the liquidator in the adminstraton of the assets of the com- 
pany. 

The board of trade may, wth the approval of the treasury, appoint 
such additional officers as may be required for winding up compa- 
nies, and may remove any person so appointed. 4 

An inspector general in companies liquidation was appointed in 
1891, to whom the official receivers of the board of trade throughout 
the country report in connection with matters arising under the com- 
panies act. 5 

The officers of the courts winding up companies shall report to 
the board of trade at such times and in such manner as may be 
required, and from those returns the board shall prepare books which 
shall be open for public information under the regulations of the 
board. 6 

The lord chancellor may, with the concurrence of the president of 
the board of trade, make general rules for carrying into effect the 
objects of this act so far as it relates to the winding up of companies 
in England. 7 

Such rules shall be laid before Parliament and shall be judicially 
noticed and shall have the force of law. 7 (Rules made under this 
authority may be found in Statutory Rules and Orders, 1909, pp. 
61-203.) 

The accounts of the board of trade in relation to the winding up 
of companies in England shall be audited in such manner as the 
treasury may direct, and the board shall make such returns as the 
treasury direct 8 for the purposes of the account to be laid before 
Parliament. 

Defunct companies. — Where the registrar of companies has rea- 
sonable cause to believe that a company is not carrying on business, 
he shall send an inquiry by mail to its registered office, and in default 
of an answer in one month shall in 14 days after the expiration of 
the month send a second, after which in default of an answer for 

1 Companies (consolidation) act 1908, sec. 159. 

2 Companies (consolidation) act 1908, sec. 157. 

3 Companies (consolidation) act 1908, sees. 152, 160; Statutory Rules and Orders, 1909. 
p. 95. 

4 Companies (consolidation) act 1908, sec. 233. 
6 Statutory Rules and Orders, 1891. 

* Companies (consolidation) act 1908, sec. 235. 
'Companies (consolidation) act 1908, sec. 237. 
8 Companies (consolidation) act 1908, sec. 234. 



148 TRUSTS IN FOREIGN COUNTRIES. 

one month a notice will be published in the Gazette that unless cause 
is shown to the contrary within three months the company shall be 
removed from the register and dissolved. 

The registrar may, under similar conditions, remove a company 
from the register when he has reasonable cause to believe either that 
no liquidator is acting or that the affairs of the company are fully 
wound up and the returns required to be made by him have not been 
made for six months after a demand for them has been made. 

The court may restore any company to the register if, on the appli- 
cation of the company, or any member or creditor, it is satisfied that 
the company was carrying on business, or otherwise that it is just 
that the company be restored to the register upon such conditions as 
the court may deem fit, and the company shall be deemed to have con- 
tinued in existence as if its name had not been struck off. 1 

The board of trade shall cause an annual report of the matters 
within this act to be prepared and laid before both Houses of Par- 
liament. 2 

REPORTS OF THE BOARD OF TRADE. 

The publicity afforded by the law has taken two forms, the annual 
reports of the board of trade, submitted to Parliament in accordance 
with the act, and the information required to be filed and open to the 
inspection of the public. 

With -the information available at the office of the registrar of 
companies, and from the reports of the official receiver on companies 
wound up, the board of trade has been able to report upon improper 
methods of promotion or management and common causes of failure 
during the previous year. While thus enabled to observe the defi- 
ciencies of the law, it has, by means of the same information, been 
possible to report upon the effect of each amendment. The reports 
also contain typical cases illustrating various causes of failure, often 
accompanied with frank comment upon the methods employed by the 
promoters or officers, and the board has repeatedly called the atten- 
tion of the public to the provisions of the law intended for their 
protection. 

In addition to the above, each report contains detailed statistics in 
respect of companies registered or wound up during the preceding 
year. 

The following extracts taken from the first annual report of the 
board of trade (1891) illustrate the character of these reports: 

But, perhaps, the most frequent of all the abuses arising in connection with 
the formation of companies, lies in the exercise of the power by which the 
directors proceed to allotment on a purely nominal share subscription. Forget- 
ful of this fact innumerable cases have occurred where persons have been in- 
duced to subscribe for shares in a company, believing that it would start 
possessed of ample means with which to carry out the objects for which it was 
formed, and where they subsequently found that by the act of allotment upon a 
merely nominal subscription, the directors had compelled them to become part- 
ners in a company which was doomed to failure by the total inadequacy of its 
resources. This evil is aggravated by the fact that the directors are in the 
majority of cases the nominees of the promoters, and that it is, as a rule, [to] 
the interest of the latter that an allotment should be made. 

In regard to some of these matters the evils referred to may, to some extent, 
be capable to mitigation by legislation, but it will probably be found impossible 

1 Companies (consolidation) act 1908, sec. 242. 
"Companies (consolidation) act 1908, sec. 283. 



TRUSTS IN FOREIGN COUNTRIES. 149 

to guard against all the everchanging and endless devices of unscrupulous pio- 
moters, and the most effective remedy will probably be found in the exercise of 
greater caution and discrimination on the part of the investing public. 
******* 

Again, some of the companies were formed merely for the purpose of carrying 
out an idea, not accompanied by the acquisition of any property or rights — 
sometimes an idea involving great benefit to the community, if it could be 
properly carried out. The failure of such companies is not to be taken as 
showing that the idea in itself was erroneous, but merely that the means 
adopted were unsuitable or insufficient. In all these cases, the amount of 
capital subscribed by the public was wholly inadequate for the purposes of the 
company, as judged even by the estimate of its promoters on its formation. 
The fact is, the directors should never have gone to allotment; and in doing 
so they entirely neglected and sacrificed the interests of the subscribers. In 
many cases what they did, was simply to seize the moneys of a mere handful 
of subscribers, and to use them in paying the expenses of promotion, and the 
other preliminary expenses of the company. 

In discussing the failures of the past year in its eighteenth annual 
report, the board of trade (1908) cited the following case: 

Brazilian Rubber Plantations and Estates. Limited (High Court). This 
company was formed on 31st January, 1906, with a nominal capital of 180,000 
pounds, for the purpose of acquiring and developing rubber estates in Brazil. 

A few months prior to the formation of the company the original vendor of 
these estates sold them for 15,000 pounds. The purchaser in his turn sold them 
in October, 1905, to the promoters for 20,000 pounds. In January, 1906, the 
promoters formed a syndicate to acquire the property for 50,000 pounds, and 
through the medium of the syndicate promoted the company and sold the 
property to it for 150,000 pounds on the 31st of January, 1906. This was a 
grossly inflated figure, no change having taken place in the property since the 
previous October, when it was sold by the original vendor for 15,000 pounds. 

The company's prospectus, which was issued on the 1st February, 1906, the 
day after the registration of the company, contained various misstatements, 
which are set out in the official receiver's report, and among them the official 
receiver refers to the following paragraphs: 

" The area of the estates, which are freehold and unencumbered, is approxi- 
mately 12,500 acres. 

" The distance from the estates to the railway is about 12 miles on an easy 
gradient." 

These two statements are said by the directors to be based partly on a letter 
to the effect that mules carried the produce to the railway, about 12 miles dis- 
tant. The word " mules " in the letter, the directors state, was misread " miles," 
and, 20 miles being taken to mean 20 square miles, they considered that they 
were moderate when they set down the 20 square miles in the prospectus as 
containing only 12,500 English acres. 

The official receiver reported to the court that in his opinion fraud had been 
committed by the promoters and by some of the directors, and a public exami- 
nation has been held by the court of the persons reported against by the official 
receiver. 

The Nineteenth Annual Report (1909) contains the following: 

Another instance of the way in which persons disregard information which is 
made available by law for their protection is afforded by the case of The Bee 
and The Bells Refreshment Contracting Syndicate (Ltd.), (Leeds). This com- 
pany was registered in October. 1909. with a nominal capital of £5,000 in £1 
shares, as a private company. The object of forming the company was to enable 
the promoter (who was a refreshment caterer and who had. obtained the ex- 
clusive right to supply refreshments on the aviation grounds at Blackpool during 
the flying week) to carry the business through without personal liability. 
Though the nominal capital was £5.000, the capital subscribed for cash was £2 
only, and this fact was open to any inquirer at Somerset House. With this 
capital of £2 only at his back, the company managed to incur liabilities to the 
extent of £1,551, and the official receiver estimates that the net loss to creditors 
will amount to 19s. in the pound. 



150 TRUSTS IN FOREIGN COUNTRIES. 

The following extract is from the annual report for the year 1910 : 

Insurance companies — There have been several important failures during the 
past year of companies carrying on various forms of insurance business. Of 
these failures that of the Law Car & General Insurance Corporation (Ltd.), is, 
so far as figures are concerned, the most important, but the National Free Homes 
Association (Ltd.) is a very bad example of the companies which cater for poor 
people and induce them to part with their savings. This latter company received 
upward of £17,000 in small sums from poor people, and practically the whole 
of this sum was absorbed by the directors and officials in the payment of their 
own salaries. 

INFORMATION AVAILABLE TO THE PUBLIC. 

The following information is open to the inspection of the public 
at the office of the registrar of companies, with the exception of one or 
two items, where, as indicated, the document is for the inspection of 
members or contributories only. 

As an indication of the actual use of this information by the public, 
the registrar of companies reported in 1895 that over 100 persons 
searched the files daily. 

1. The Memorandum of Association, which must state : 

(a) The name of the company, with " Limited " as the last word of 
the name. 

(b) Location of registered office. 

(c) Objects of company. 

(d) That the liability of its members is limited. 

(e) The amount of capital and number of shares. 

(/) The names of each subscriber and amount of stock subscribed 
for. 1 

2. Any change of name by company. 2 

3. Any alterations in memorandum of association. 8 

4. Articles of association provided by the company (if any), or 
those provided by the act of 1908. 4 

5. A list of members of the company, a list of all persons who 
have ceased to be members, their names, addresses, and occupations, 
the number of shares held by each, and the date of all transfers of 
stock. 5 

Note. — These requirements as to the publicity of lists of members of com- 
panies and their holdings are in marked contrast with those existing in the 
United States. The laws of fifty States and Territories in respect of the 
accessibility of this information may be classified as follows : 

Open to the public, 6. Two of these fail to provide a penalty for noncom- 
pliance. Open to persons " interested " 2. One of these fails to provide a 
penalty for noncompliance. Open to stockholders and creditors, 14. Three of 
these fail to provide a penalty for noncompliance. Open to stockholders only, 
21. Three of these fail to provide a penalty for noncompliance. Open to 
creditors only, 1. List required to be kept, but no provision for access, 4. No 
provision relating to this subject, 2. Total 50. (Corporation Manual, 1910.) 

6. A summary distinguishing between shares issued for cash and 
shares issued as fully or partly paid up otherwise than in cash, 
specifying — 

(a) "The share capital, and the number of shares. 
(b) The number of shares taken from the commencement of the 
company to the date of the return. 

i Companies (consolidation) act, 1908, sec. 13. 

8 Companik»s (consolidation) act, 1908, sec. 8. 

8 Companies (consolidation) act, 1908, sec. 9. 

* Companies (consolidation) act, 1908, sec. 11. 

'Companies (consolidation) act, 1908, sec. 26. 



TRUSTS IX FOREIGN COUNTRIES. 151 

(c) The amount called up on each share. 

(d) The total amount of calls received. 

(e) The total amount of calls unpaid. 

(/) The total amount of the sums (if any) paid by way of com- 
mission in respect of any shares or debentures, or allowed by way of 
discount in respect of any debentures, since the date of the last 
return. 

(g) The total number of shares forfeited. 

(A) The total amount of shares or stock for which share warrants 
are outstanding at the date of the return. 

(i) The total amount of share warrants issued and surrendered 
respectively. 

(j) The number of shares or amount comprised in each share 
warrant. 

(k) The names and addresses of directors. 

(I) The total debt due from the company in respect of all mort- 
gages and charges. 1 

(1) For the purpose of securing any issue of debentures. 

(2) On uncalled capital. 

(3) Created or evidenced by an instrument which, if executed by 
an individual, would require registration, as a bill of sale. 

(4) On any land or interest therein. 

(5) On any book debts. 

(6) Or a floating charge on the undertaking or property of the 
company. 2 

7. A balance sheet audited by the company's auditors (except where 
the company is a private company), containing a summary of its 
share capital, its liabilities, and its assets, giving such particulars 
as will disclose the general nature of those liabilities and assets, how 
the values of the fixed assets have been arrived at, and showing the 
total amount (if any) paid in commissions for subscriptions to shares 
or debentures, 3 but it need not include a statement of profit and loss. 1 

8. A statutory report, certified by two directors, a copy of which 
has been sent to every member of the company at least seven days 
before a general meeting, called the statutory meeting, held not less 
than one month nor more than three months from the date at which 
the company is entitled to commence business. 

The obvious purpose of the statutory meeting with its preliminary report is 
to put the shareholders of the company as early as possible in possession 
of all the important facts relating to the new company. * * * Furnished with 
these particulars, the shareholders are to have an opportunity of meeting and 
discussing the whole situation — the management, methods, and prospects of the 
company. If the shareholders fail to do so, they have only themselves to 
blame. 4 

This report must show — 

(a) The total shares allotted, distinguishing shares allotted as 
fully or partly paid up or otherwise than in cash, and stating in the 
case of shares partly paid up the extent to which they are so paid 
up. and in either case the consideration for which they have been 
allotted. 

1 Companies (consolidation) act, 1008, sec. 26. 

2 Companies (consolidation) act, 3 008, sec. 03. 
•Companies (consolidation) act, 1008, sec. 00. 
4 Palmer's Company Law (7th ed.), p. 158. 



152 TKUSTS IN FOEEIGN COUNTEIES. 

(b) The total amount of cash received by the company in respect 
of all the shares allotted, distinguished as aforesaid. 

{c) An abstract of the receipts of the company on account of its 
capital, whether from shares or debentures, and of the payments 
made thereout, up to within seven days of the date of the report, 
exhibiting under distinctive headings the receipts of the company 
from shares and debentures and other sources the payments made 
thereout, and particulars concerning the balance remaining in hand, 
and an account or estimate of the preliminary expenses of the com- 
pany. 

(d) The names, addresses, and descriptions of the directors, audi- 
tors, managers, and secretary. 

(e) The particulars of any contract, the modification of which is 
to be submitted to the meeting for its approval, together with the 
particulars of the proposed modification. 1 (This statutory report 
need not be forwarded or filed by a private company.) 

9. Copies of every special and extraordinary resolution. 2 

10. Copies of every " prospectus " issued by or on behalf of a 
company, or any person who is or has been engaged in the formation 
of the company. 

The discipline exercised by the act is largely by means of the 
provisions in respect of this document, which is defined as any 
" notice, circular, advertisement, or other invitation, offering to the 
public for subscription or purchase any shares or debentures of a 
company." To comply with the requirements of the act, the pros- 
pectus must show — 

(a) The contents of the memorandum, with the names, descrip- 
tions, and addresses of the signatories, and the number of shares 
subscribed for by them respectively ; and the number of founders or 
management or deferred shares, if any, and the nature and extent of 
the interest of the holders in the property and profits of the company; 
and 

(b) The number of shares, if any, fixed by the articles as the 
qualification of a director, and any provision in the articles as to the 
remuneration of the directors; and 

(c) The names, descriptions, and addresses of the directors or 
proposed directors; and 

(d) The minimum subscription on which the directors may proceed 
to allotment, and the amount payable on application and allotment 
on each share; and in the case of a second or subsequent offer of 
shares, the amount offered for subscription on each previous allot- 
ment made within the two preceding years, and the amount actually 
allotted, and the amount, if any, paid on the shares so allotted; and 

(e) The number and amount of shares and debentures which 
within the two preceding years have been issued, or agreed to be 
issued, as fully or partly paid up otherwise than in cash, and in the 
latter case the extent to which they are so paid up, and in either case 
the consideration for which those shares or debentures have been 
issued or are proposed or intended to be issued ; and 

(/) The names and addresses of the vendors of any property 
purchased or acquired by the company, or proposed to be purchased 

1 Companies (consolidation) act, 1908, sec. 65. 
* "Companies (consolidation) act, 1908, sec. 70. 



TRUSTS IN FOREIGN COUNTRIES. 153 

or acquired, which is to be paid for wholly or partly out of the 
proceeds of the issue offered for subscription by the prospectus, or 
the purchase or acquisition of which has not been completed at the 
date of issue of the prospectus, and the amount payable in cash, 
shares, or debentures, to the vendor, and where there is more than one 
separate vendor, or the company is a subpurchaser, the amount so 
payable to each vendor: Provided, That where the vendors or any 
of them are a firm the members of the firm shall not be treated as 
separate vendors ; and 

(g) The amount (if any) paid or payable as purchase money in 
cash, shares, or debentures, for any such property as aforesaid, 
specifying the amount (if any), payable for good will; and 

(A) The amount (if any) paid within the two preceding years, or 
payable, as commission for subscribing or agreeing to subscribe, or 
procuring or agreeing to procure subscriptions, for any shares in, 
or debentures of, the company, or the rate of any such commission : 
Provided, That it shall not be necessary to state the commission 
payable to subunderwriters : and 

(i) The amount or estimated amount of preliminary expenses ; and 

(j) The amount paid within the two preceding years or intended 
to be paid to any promoter, and the consideration for any such pay- 
ment; and 

(k) The dates of and parties to every material contract and a rea- 
sonable time and place at which any material contract or a copy 
thereof may be inspected : Provided, That this requirement shall not 
apply to a contract entered into in the ordinary course of the business 
carried on or intended to be carried on by the company, or to any 
contract entered into more than two years before the date of issue of 
the prospectus; and 

(I) The names and addresses of the auditors (if any) of the com- 
pany; and 

(m) Full particulars of the nature and extent of the interest (if 
any) of every director in the promotion of, or in the property pro- 
posed to be acquired by, the company, or, where the interest of such 
a director consists in being a partner in a firm, the nature and extent 
of the interest of the firm, with a statement of all sums paid or 
agreed to be paid to him or to the firm in cash or shares or otherwise 
by any person, either to induce him to become, or to qualify him as, a 
director or otherwise for services rendered by him or by the firm in 
connection with the promotion or formation of the company; and 

(n) Where the company is a company having shares or more than 
one class the right of voting at meetings of the company conferred 
by the several classes of shares respectively. 1 

11. A company which does not issue a prospectus shall not allot 
any shares or debentures unless there has been filed with the regis- 
trar of companies a statement in lieu of a prospectus signed by every 
person named as a director or a proposed director and containing the 
particulars set out in the following form: 2 (A private company is 
not required to file a prospectus or a statement in lieu of a pro- 
spectus.) 

1 Companies (consolidation) act, 1008. sec. 81. 
"Companies (consolidation) act, 1908, sec. 82. 



154 



TRUSTS IN FOREIGN COUNTRIES. 



Statement it- Hen of prospectus filed by , limited, pursuant to section 82 

of the companies (consolidation) act, 1908. Presented for filing by . 



The nominal share capital of the company- 



Divided into 

Names, descriptions, and addresses of directors or proposed 
directors 

Minimum subscription (if any) fixed by the memorandum or 
articles of association on which the company may proceed to 
allotment 

Number and amount of shares and debentures agreed to be issued 
as fully or partly paid-up otherwise than in cash 

The consideration for the intended issue of those shares and 
debentures 

Names and addresses of vendors J of property purchased or 
acquired or proposed to be purchased 2 or acquired by the 
company 

Amount (in cash, shares, or debentures) payable to each sep- 
arate vendor , 

Amount (if any) paid or payable (in cash or shares or debentures) 
for any such property, specifying amount (if any) paid or pay- 
able for good will 

Amount (if any) paid or payable as commission for subscribing 
or agreeing to subscribe or procuring or agreeing to procure sub- 
scriptions for any shares or debentures in the company, on 

Rate of the commission 

Estimated amount of preliminary expenses . 

Amount paid or intended to be paid to any promoter 

Consideration for the payment 

Dates of and parties to every material contract (other than con- 
tracts entered into in the ordinary course of the business in- 
tended to be carried on by the company or entered into more 
than two years before the filing of this statement) , 

Time and place at which the contracts of copies thereof may be 
inspected 

Names and addresses of the auditors of the company (if any) 

Full particulars of the nature and extent of the interest of every 
director in the promotion of or in the property proposed to be 
acquired by the company, or, where the interest of such a di- 
rector consists in being a partner in a firm the nature and ex- 
tent of the interest of the firm , with a s tatement of all sums paid 
or agreed to be paid to him or to the firm in cash or shares, or 
otherwise, by any person either to induce him to become, or to 
qualify him as a director, or otherwise for services rendered by 
him or by the firm in connection with the promotion or forma- 
tion of the company 

Whether the articles contain any provisions precluding holders 
of shares or debentures receiving and inspecting balance sheets 
or reports of the auditors or other reports 



£ 

{Shares of £ each. 
Shares of £ each. 
Shares of £ each. 



1 shares of £ fully paid. 

2 shares upon which £ per 

share credited as paid. 

3 debenture, £ 

4. Consideration. 



{Total purchase price. .£. 
Cash £. 
Shares ...£. 
Debentures £ . 
Goodwill £. 

(Amount paid. 
Amount payable. 

Rate per cent. 

£ 

/Name of promoter. 
\Amount, £ 

Consideration. 









Nature of the provisions. 



» For definition of vendor, see section 81 (2) of the companies (consolidation) act, 1908. 
2 See section 81 (3) of the companies (consolidation) act, 1908. 

(Signatures of the persons above named as directors or proposed directors, or of their agents authorized 
in writing.) 



12. Notice of the consolidation or division of share capital into 
shares of a larger amount, or the conversion of shares into stock, 
or a reconversion of stock into shares, shall be filed with the regis- 
trar of companies. 1 

13. Copy of order of the court approving any reduction of capital. 2 

14. Particulars of any mortgage or charge for the purpose of se- 
curing any issue of debentures, or on uncalled share capital, or 
created or evidenced by an instrument which, if executed by an in- 
dividual, would require registration as a bill of sale, or on any 



1 Companies (consolidation) act, 1908, sec. 42. 
•Companies (consolidation) act, 1908, sec. 51. 



TRUSTS IN FOREIGN COUNTRIES. 155 

land or interest therein, or on book debts, or a floating charge on the 
undertaking or property of the company, together with a copy of 
the instrument. 1 

15. Particulars as to debentures as follows: The total amount se- 
cured by the series, the dates of the resolutions authorizing the issue, 
the date of the deed (if any), a general description of the property 
charged, the names of the trustees (if any) for the debenture holders, 
the rate per cent of any commission paid for subscriptions, together 
with the deed containing the charge, or if there is no such deed, a 
copy of one of the debentures. 1 

16. Notice of the appointment of a receiver. 2 

17. Semiannual abstract of receipts and disbursements of a re- 
ceiver, and a notice that he has ceased to act. 3 

18. Notice of any winding-up order made by the court. 4 

19. A copy of the report of the official liquidator of a company 
being wound up by the court, showing receipts and disbursements 
and the progress of the liquidation. 5 (For the inspection of creditors 
and interested persons only.) 

20. A statement to the official receiver by the directors and chief 
officer of a company being wound up by the court, containing par- 
ticulars of its assets and liabilities, names, residences, and occupations 
of its creditors, the securities held by them, respectively, the dates 
when such securities were given, and such further information as 
may be prescribed or as the receiver may require. 6 (This is open to 
inspection by creditors or contributories only.) 

21. Notice that a meeting of the company, called by the liquidator 
in case of a voluntary winding up, for the purpose of explaining his 
final account, has been held. 

22. Three months after registration of this notice the company 
shall be deemed dissolved, unless the dissolution is deferred by the 
court for cause shown by an interested party. 7 

23. A copy of any order of a court declaring a dissolution void 
upon the application of the liquidator or other interested party with- 
in two years of the date of the original order of dissolution. 8 

Registration office and fees. — There shall be offices for the registra- 
tion of companies at such places as the board of trade think fit, and 
documents kept by the registrar may be inspected by any person, 
who may also obtain certified copies upon the payment of reasonable 
fees for such inspection or copies. A certified copy so obtained shall 
be of equal validity with the original in all legal proceedings. 9 

24. A return of allotments of shares, from both private and public 
companies, stating the number and nominal amount of the shares in 
the allotment, the names, addresses, and descriptions of the allottees, 
and the amount (if any) paid or due on each share, and in the case 
of shares allotted as fully or partly paid up otherwise than in case, 
a contract in writing constituting the title of the allottee, together 
with any contract of sale or for services or other consideration in 

1 Companies (consolidation) act, 1908, sec. 93. 

2 Companies (consolidation) act, 1908, sec. 94. 
8 Companies (consolidation) act, 1908, sec. 95. 

* Companies (consolidation) act, 1908, sec. 143. 

5 Companies (consolidation) act, 1908, sec. 155. 

6 Companies (consolidation) act, 1908, sec. 147. 

7 Companies (consolidation) act, 1908, sec. 195. 
•Companies (consolidation) act, 1908, sec. 223. 
•Companies (consolidation) act, 1908, sec. 243. 



156 



TRUSTS. IN FOREIGN COUNTRIES. 



respect of which the allotment was made, and a return stating the 
number and nominal amount of shares so allotted, the extent to which 
they are to be treated as paid up, and the consideration for which 
they have been allotted. In the absence of a written contract the par- 
ticulars indicated on the following form shall be filed with the 
registrar. 1 

Particulars prescribed under section 88, subsection (2). Filed by Limited. Presented for riling. 1 

by . 

[In cases where a contract such as is mentioned in paragraph (&) of subsection (1) of section 88 of the 
companies (consolidation) act, 1908, is not reduced to writing, the company must, within the time limited 
in the said section, file with the registrar of joint stock companies the following particulars of the contract, 
which particulars must be stamped with the same stamp duty as would have been payable if the contract 
had been reduced to writing.] 



(1) The number of shares, in whole or in part, allotted for a consideration other than cash 

(2) If the consideration for the allotment of any shares is services, or any consideration other than 

that mentioned below in part 3, state what such consideration consists of 

(3) If the consideration for the allotment of any shares is a sale of property, or the agreement for 

sale of property, state fully the consideration for, and other terms of, such sale or agreement 
for sale 

(4) Give full particulars, in the form of the following table, of the property which is the subject 

of the sale, showing in detail how the total consideration is apportioned between the 
respective heads: 

Equitable estates, or interests in freeholds and leaseholds, whether in the United 
Kingdom or abroad (which includes hereditaments subject to a legal mortgage 

Patents, licenses, trade marks, and copyrights 

Good will 

Fixtures and fittings 

Book and other debts (including money on deposit at bank or elsewhere) , 

Benefit of contracts 

O ther property, viz: , 



Total. 



(5) If the consideration payable is partly in respect of a sale of property or agreement for a sale 

of property, and partly in respect of some other consideration, state fairly how much of the 
amount of the consideration is attributable to each of the heads of the property sold or 
agreed to be sold, and how much to such other consideration 

(6) If the consideration payable consists in the assumption by the purchaser of liabilities to 

third persons, specify the total amount of such liabilities 



Date 



(Signature.) 
(Designation of position in relation to the company.) 



PENALTIES. 



The provisions of the act of 1908 are enforced by a number of 
penalties, the most important of which are the following: 

Default in filing a copy of the prospectus with the registrar of companies. 

Penalty: The company, and every person knowingly a party to the issue 
of the prospectus, is liable to a fine not exceeding £5 for every day from the 
date of issue until a copy is filed. 2 

Untrue statements in a prospectus. 

Penalty: Every person shall be liable to compensate all subscribers for loss 
sustained by reason of such untrue statement, unless he had reasonable grounds 
for belief that the statement was true, or that, having consented to become a 
director, he withdrew his cousent, and that the prospectus was issued without 
his consent; or that, on becoming aware of its issue without his consent, he 
gave public notice of the fact. 3 

Unauthorized useo f director's name in a prospectus. 

Unauthorized use of director's name in a prospectus. 
the name, and any other person authorizing the issue of the prospectus, are 
liable to indemnify the person wrongfully named against all damages, costs, 

i Companies (consolidation) act, 1908, sec. 88, Form 52, order of 1909. 
"Companies (consolidation) act, 15)08, sec. 80. 
•Companies (consolidation) act, 1908, sec. 84. 



TRUSTS IN FOREIGN COUNTRIES. 157 

etc.. to which he may be made liable, or in defending himself against any legal 
proceedings brought against him in respect thereof. 1 

Unauthorized use of name of a person as director in the list of directors filed 
with registrar of companies, upon application for registration of the company. 

Penalty: The person applying for registration is liable to a fine not exceed- 
ing £50. 2 

Violation of the provisions of the act in respect of allotment. 

Penalty: Allotment voidable for one month after holding statutory meeting, 
and any director who knowingly contravenes or permits the contravention of 
these provisions is liable to compensate the company and the allottee for any 
loss, damages, or costs sustained. Period of limitation, two years from date 
of allotment. 3 

A company shall not commence business or exercise borrowing powers 
unless— 

Shares held subject to the payment of the whole amount in cash have been 
allotted to an amount not less in the whole than the minimum subscription, and 

Every director has paid on each of his shares, the same proportion that is 
payable on the allotment of shares offered to the public, and 

There has been filed with the registrar of companies a statutory declaration 
by the secretary or a director that the above conditions have been complied 
with; 

In the case of a company which does not issue a prospectus, there has been 
filed a statement in lieu of a prospectus. 

Penalty : Any contract made before a company is entitled to commence busi- 
ness is provisional only, and shall not bind the company until that date. 
Every person responsible for the contravention shall without prejudice to any 
other liability, be liable to a fine not exceeding £50 for every day during which 
it continues. 4 

Note. — The above section does not apply to private companies. 

Default of a limited company when allotting shares to file, within a month, 
a return showing the number and nominal amount of shares allotted, and 
amount paid or payable on each share ; or, if shares are allotted as fully or par- 
tially paid up otherwise than in cash, to file a contract showing the title of 
allotttee and any contract of sale, or for services, or other consideration for 
allotment, together with a return showing number and nominal amount of 
shares allotted, extent to which treated as paid up and consideration for which 
allotted; or, if the contract above described be not in writing, to file the pre- 
scribed particulars of contract. (See form, p. 32). 

Penalty: Every officer knowingly a party to the default is liable to a fine not 
exceeding £50 for every day during which default continues. Provided, that 
the court, in its discretion, may relieve from the penalty and extend the time 
for filing. 6 

Default in holding the statutory meeting or filing the statutory report. 

Penalty : The company may be wound up by {he court, at the instance of a 
shareholder, and costs may be charged to any person who, in the opinion of 
the court, is responsible for the default. 6 

Default in keeping at the company's registered office a list of directors or 
managers, with their names, addresses, and occupations; and in filing a copy 
of said list and all changes with the registrar of companies. 

Penalty : The company, and every director and manager knowingly and will- 
fully authorizing or permitting the default, is liable to a fine not exceeding 
£5 for each day of the default. 7 

Refusal to permit inspection of the company's register of members by any 
member gratis, and by any other person upon payment of 6d. ; or — 

Refusal to furnish copies upon payment of fees prescribed. 

Penalty: The company, and every director and manager who knowingly 
authorizes or permits the refusal, is liable to a fine not exceeding £2 for each 
refusal, and a further fine of not exceeding £2 for each day during which the 
refusal continues, and the high court may compel an immediate compliance. 1 

1 Companies (consolidation) act 1908, sec. 84. 

2 Companies (consolidation) act 1908, sec. 72. 
8 Companies (consolidation) act 1908, sec. 86. 
4 Companies (consolidation) act 1908, sec. 87. 
* Companies (consolidation) act 1908, sec. 88. 

•Companies (consolidation) act 1908, sees. 129, 137 ( b ), 141 ( 3 ). 
'Companies (consolidation) act 1908, sec. 75. 
•Companies (consolidation) net 1908, sec. 30. 



158 TRUSTS IN FOREIGN COUNTRIES. 

Default in keeping a register of mortgages and charges showing particulars 
in e&Sh case. 

Penalty : Every director, manager, or other officer of the company who know- 
ingly and willfully authorizes or permits the omission of any entry is liable to 
a fine not exceeding £50.* 

Default in furnishing the registrar with the particulars and a copy of any 
mortgage or charge on the property, capital, book debts, etc., of the company. 

Penalty: Security is void against the liquidator or creditors, but without 
prejudice to the obligation to repay the money so secured, which becomes 
immediately payable. 2 

Default in filing with the registrar of companies the " particulars " of any 
mortgage or charge created by the company. 

Penalty: The compauy, and every director, manager, secretary, or other 
person knowingly a party to the default, is liable to a fine not exceeding £50 for 
every day during which the default continues. 3 

Default in filing with the registrar of companies a copy of any mortgage or 
charge created by the company. 

Penalty : The company, and every director, manager, and other officer of the 
company who knowingly and willfully authorized or permitted the default, is, 
without prejudice to any other liability, liable on summary conviction to a 
fine not exceeding £100.* 

Default in indorsing upon any debenture or certificate of debenture stock, 
before delivery, a copy of the certificate of registration. 

Penalty : Any person knowingly and willfully authorizing or permitting such 
default is, without prejudice to any other liability, liable on summary convic- 
tion to a fine not exceeding £100. 5 

Default in permitting an inspection of the company's register of mortgages 
and charges by members of the company without charge, and by other persons 
upon payment of Is., and 

Default in permitting an inspection of copies of the instruments by members 
of the company without charge. 

Penalty : Any officer refusing inspection, and every director and manager 
authorizing or knowingly and willfully permitting the refusal, is liable to a 
fine not exceeding £5, and a further fine not exceeding £2 for every day during 
which the refusal continues, and the high court may compel an immediate 
inspection. 8 

Default in permitting debenture holders and shareholders to inspect the reg- 
ister of debenture holders, and in furnishing copies to any debenture holder of 
any trust deed securing any issue of debentures, upon payment of the prescribed 
fee. 

Penalty : The company, and every director or other officer who knowingly 
authorizes or permits the refusal, is liable to a fine not exceeding £5, and a 
further fine of not exceeding £2 for each day during which the refusal con- 
tinues. 7 

Default in forwarding a copy of every special or extraordinary resolution to 
the registrar of companies. 

Penalty: The company, and every director and manager who knowingly and 
willfully authorizes or permits any such default, is liable to a fine not exceeding 
£2 for every day during which the default continues. 8 

Default in annexing a copy of every special resolution in force to copies of the 
registered articles subsequently issued, or, where there are no registered arti- 
cles, default in forwarding the resolution to any member upon payment of 
1 shilling. 

Penalty : The company, and every director and manager knowingly and will- 
fully authorizing or permitting the default, is liable to a fine not exceeding £1 
for each copy in respect of which default is made. 8 

Default in indicating on copies of the memorandum of association issued any 
alteration of capital or shares. 

1 Companies (consolidation) act 1908, sec. 100. 

2 Companies (consolidation) act 1908, sec. 93. 
8 Companies (consolidation) act 1908, sec. 99. 

* Companies (consolidation) act 1908, sec. 99 ( 2 ). 

6 Companies (consolidation) act 1908, sec. 99 ( 3 ). 
•Companies (consolidation) act 1908, sec. 101. 

7 Companies (consolidation) act 1908, sec. 102. 
•Companies (consolidation) act 1908, sec. 70. 



TRUSTS IN FOREIGN, COUNTRIES. 159 

Penalty ; The company, and every director and manager who knowingly and 
willfully' authorizes or permits the default, is liable to a fine not exceeding £1 
for each copy so issued. 1 

Default in notifying the registrar of companies of any special resolution 
authorizing the increase of capital beyond its registered capital, or, in case of a 
company not having a share capital, of the increase in the number of members 
beyond the registered number. 

Penalty : The company, and every director and manager who knowingly and 
willfully authorizes or permits the default, is liable to a fine not exceeding £5 
for every day during which the default continues. 2 

Default in indicating a reduction of capital upon any copies of the mem- 
orandum of association subsequently issued. 

Penalty : The company, and every director and manager knowingly and will- 
fully authorizing the default, is liable to a fine not exceeding £1 for each copy 
so issued. 8 

Default in disclosing to the court the name of any creditor entitled to object 
to the reduction of capital or misrepresenting the nature and amount of any 
claim. 

Penalty : If any director, manager, or officer willfully is a party to or is privy 
to such concealment or misrepresentation, he shall be guilty of a misdemeanor. 4 

Default in filing with the registrar of companies an order of the court con- 
firming any alteration in the memorandum of association with regard to the 
objects of the company. 

Penalty: The company is liable to a fine not exceeding £10 for every day 
during which it is in default. 6 

Default in producing documents or giving answers required by inspectors ap- 
pointed by the board of trade during an investigation demanded by the required 
number of stockholders. 

Penalty : A fine not exceeding £5 for each offense. 6 

Default in notifying registrar of companies of the appointment of a receiver. 

Penalty : The person obtaining the order, or appointed the receiver under 
the powers contained in any instrument, is liable to a fine not exceeding £5 for 
every day during which the default continues. 7 

Default by receiver appointed under the powers in any instrument, in filing 
-an abstract of receipts and expenditures once in every half year, or in filing 
notice that he has ceased to act as receiver. 

Penalty : A fine not exceeding £50. 8 

Destruction, mutilation, alteration, or falsification of any books, papers, or 
securities of any company being wound up with intent to defraud or deceive 
any person. 

Penalty : Any director, officer, or contributory guilty of the above shall be 
liable to imprisonment for a term not exceeding two years, with or without 
hard labor. 9 

Default by the liquidator, in the case of a voluntary winding up, in filing a 
return to the registrar of companies of the holding of a general meeting for the 
purpose of laying his final accounts before it. 

Penalty : A fine of not exceeding £5 for every day during which the default 
continues. 10 

Default by any person applying for and securing an order of the court defer- 
ring the dissolution of the company in filing a copy of such order with the regis- 
trar of companies. 

Penalty : A fine of £5 for every day during which the default continues. 10 

Forgery or alteration of any share warrant or coupon with intent to defraud, 
or falsely personating the owner of any share, thereby endeavoring to receive 
any money due to the true owner. 

Penalty : Any person guilty of the above shall be liable to penal servitude for 
life, or for any term not less than three years, in the discretion of the court. 11 

1 Companies (consolidation) act, 1908, sec. 41. 

2 Companies (consolidation) act, 1908, sec. 44. 
8 Companies (consolidation) act, 1908, sec. 52. 
4 Companies (consolidation) act, 1908, sec. 54. 

8 Companies (consolidation) act, 1908, sec. 9 (7). 

6 Companies (consolidalion) act, 1908, sec. 109. 

7 Companies (consolidation) act, 1908, sec. 94. 

8 Companies (consolidation) act, 1908, sec. 95. 

9 Companies (consolidation) act, 1908, sec. 216. 
10 Companies (consolidation) act, 1908, sec. 195. 
u Companies (consolidation) act, 1908, sec. 38. 



160 TRUSTS IN FOREIGN COUNTRIES. 

Engraving or making without lawful authority any plate, etc., of any share 
warrant or coupon of any company, or knowingly having such in custody. 

Penalty : Penal servitude for not less than 3 nor more than 14 years, at the 
discretion of the court. 1 

If any person, on examination on oath authorized under this act, or in any 
affidavit or deposition in or about the winding up of any company, or otherwise 
in or about any matter arising under this act, willfully and corruptly gives 
false testimony, he shall be liable to the penalties for willful perjury. 

Any person willfully making a statement false in any material particular, 
knowing it to be false, in any return, report, certificate, balance sheet, or other 
document relating to the conclusiveness of certificates of incorporation, appoint- 
ments or advertisements of directors, commencement of business, returns as to 
allotments, statutory meetings, particulars as to directors and mortgage debt 
and the statement in the form of a balance sheet in the annual summary; ap- 
pointment, remuneration, powers, and duties of auditors; obligations of com- 
panies where no prospectus is issued; registration of mortgages and charges; 
filing of accounts of receiver and manager; notice by liquidator in voluntary 
winding up of his appointment; rights of creditors in voluntary winding up; 
requirements as to companies established outside of the United Kingdom; 
annual report by board of trade, shall be guilty of a misdemeanor, and liable 
on conviction on indictment to imprisonment not exceeding two years, with or 
without hard labor, and on summary conviction to imprisonment for a term 
not exceeding four months, with or without hard labor, and in either case to 
a fine in lieu of or in addition to such imprisonment: Provided, That the fine 
imposed on summary conviction shall not exceed flOO. 1 

If in any proceeding against a director of a company for negligence or breach 
of trust it appears that such person is or may be liable in respect of the negli- 
gence or breach of trust, but has acted honestly and reasonably and ought fairly 
to be excused, the court may relieve him, either wholly or partly, from his 
liability on such terms as seems proper. 2 

Any manager, director, or public officer of a body corporate who shall make, 
or concur in making, circulating, or publishing any written statement or 
account known to be false in any material particular, with intent to deceive or 
defraud any member, shareholder, or creditor of such body corporate, or to 
induce any person to become a shareholder, or to intrust or advance any 
property to such body corporate, or to enter into any security for its benefit, 
shall be guilty of a misdemeanor, and liable to be kept in penal servitude for 
not less than three nor more than seven years, or to be imprisoned for any 
term not exceeding two years, with or without hard labor, and with or without 
solitary confinement. 3 

Default in furnishing members with a copy of the memorandum and articles 
of association upon the payment of 1 shilling. 

Penalty: The company is liable to a fine not exceeding £1 for each offense. 4 

Default in displaying the name of the company on its place of business. 

Penalty: The company is liable to a fine not exceeding £5 for each day, and 
every director and manager knowingly and willfully authorizing or permitting 
the default is liable to the like penalty. 5 

Default in displaying the name of the company on advertisements, official 
publications, negotiable instruments, etc., or the use of a seal without such 
name displayed thereon. 

Penalty: Every director, manager, or officer authorizing the issue of the 
above is liable to a fine not exceeding £50, and is personally liable on the 
instrument unless duly paid by the company. 15 

Name of company. — The purpose of the legislature in requiring the publica- 
tion of the company's name was that a company of limited liability should 
continually bring to the notice of those who might deal with it the fact that 
it is " limited." 

See also Atkiri & Co. v. Wardle and others (61 L. T., 23), in which the 
South Shields Salt Water Baths Co. (Ltd.) was misdescribed in a bill as the 
Salt Water Baths Co. (Ltd). The directors were held personally liable on 
the bill. 6 

1 Companies (consolidation) act, 1908, sec. 281 and Schedule V. 
3 Companies (consolidation) act, 1908, sec. 279. 
8 25 and 2G Vict., eiiap. 96, sec. 84. 

* Companies (consolidation) act, 1908, sec. 18. 
8 Companies (consolidation) act, 1908, sec. 63. 

• Palmer's Company Law (7th ed.), p. 244. 



TRUSTS IN FOREIGN COUNTRIES. 161 

Default in notifying the registrar of companies of the situation of the regis- 
tered office of the company and any change therein. 

Penalty: A fine not exceeding £5 for every day during which the default 
continues. 1 

Power of court to assess damages against delinquent directors. — 
Where, in the course of winding up, it appears that any person who 
has taken part in the promotion, formation, management, or liqui- 
dation of the company has misapplied or otherwise become account- 
able for any property of the company, or has been guilty of a breach 
of trust, the court may examine into the conduct of such person and 
compel restoration of such money or property or any part thereof 
without prejudice to criminal liability. 2 

Prosecution of delinquent directors. — If it appears to the court, in 
the course of a winding up by or subject to the supervision of the 
court, that any past or present director, manager, officer, or member 
of the company has been guilty of any offense in relation to the com- 
pany for which he is criminally responsible, the court may, on the 
application of any person interested in the winding up, or of its own 
motion, direct the liquidator to prosecute for the offense, and may 
order the costs and expenses to be paid out of the assets of the 
company. 3 

If it appears to the liquidator in the course of a voluntary winding 
up that any past or present director, manager, officer, or member of 
the company has been guilty of any offense in relation to the company 
for which he is criminalty responsible, he, with the previous sanction 
of the court, may prosecute the offender, and all expenses properly 
incurred by him in the prosecution shall be payable out of the assets 
of the company, in priority to all other liabilities. 2 

When an official receiver of a company being wound up by the 
court reports that in his opinion fraud has been committed by any 
person in the promotion, formation, or management of the company, 
the court may subject such person to a public examination, in which 
the receiver, liquidator, creditor, and contributory may take part. 
Notes of the examination shall be taken down and may be used in 
evidence against the person so examined. 4 

The following table indicates the extent to which the provisions of 
the company law of England in respect to publicity have been 
adopted throughout the Empire : 

1 Companies (consolidation) act, 1908, sec. 62. 

"Companies (consolidation) act, 1908, sec. 215. 

•Companies (consolidation) act, 1908, sec. 217. 

* Companies (consolidation) act, 1908, sec. 175. 

67838—12 11 



162 



TRUSTS IN FOREIGN COUNTRIES. 



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TRUSTS IN FOREIGN COUNTRIES. 163 

OUTLINE OF THE HISTORY AND ORGANIZATION OF BOARD OF TRADE OF 

ENGLAND. 

Prior to 1782 there existed in England a body known as the 
Board of Trade and Plantations, whose duties were, when requested, 
to consult and advise the Government on commercial questions. 
Being advisory, with no administrative powers and only intermit- 
tently consulted, it became a body of no practical importance, and 
was abolished by 22 George III (c. 82, s. II, XV, 1782), and its duties 
transferred to a committee of the privy council. 

In 1786 a large committee was appointed for the consideration of 
all matters relating to trade and foreign plantations, the appoint- 
ment being based on the act of 1782. * 

This new committee was, like its predecessor, purely advisory. It 
was entirely discretionary with the Government officials whether or 
not they should consult the committee at all, or act on its advice if 
obtained. During the early years of its existence the business of the 
committee was done by resolutions passed at a board consisting of 
such members as chose to attend, the average (according to the 
minute books from, 1786 to 1797) being only seven or eight. As the 
president was the only member who was regularly present, and as he 
was competent to act alone (the order in council by which the com- 
mittee was appointed not requiring a quorum), the business was 
gradually drawn into the president's hands, more especially as the 
board's administrative functions began to arise. Thus, while the 
board of trade presents outwardly the appearance of a permanent 
staff, under a secretary, there exists behind it a dormant committee 
of the privy council, which, while seldom heard of, is nevertheless 
recognized. 

It was not until 1840 that it was intrusted with any great adminis- 
trative powers, when, by 3 and 4 Victoria (c. 97), the duty of settling 
and approving the by-laws of railways was imposed upon it. From 
that date the regulative powers have been increased. The president 
of the board is usually a member of the cabinet. The board of trade 
has become an administrative and regulative body, the duties im- 
posed upon it being so numerous and varied that seven departments 
have been created to perform them, namely : 

I. The statistical and commercial department, which, in addition 
to the preparation and publication of commercial statistics, advises 
other offices when requested, and these requests have in late years 
been more frequent. 

II. The railway department, which, besides administering railway 
legislation, perforins duties not obviously connected with locomotionj 
such as the control of various matters connected with the metro- 
politan gas companies, patents, trade-marks, etc. The joint-stock 
companies registration office 2 is under this department. Annual 
reports and such special reports as may be ordered by Parliament 
are compiled by the staff. 

III. The marine department. 

IV. The harbor department. 



1900 



1 Order in council, 23d August, 1786. 

- 25 and 26 Vict., c. 89, companies act, 1862 ; 63 and 64 Vict, c. 48, companies act, 



164 . TEUSTS IN FOREIGN COUNTRIES. 

V. The finai.ce department. The bankruptcy acts, 1883 and 1890, 
and the companies (winding-up) act 1890, have placed the monej 
produced by the realization of the assets of bankrupts and joint- 
stock companies which are in compulsory liquidation under the con- 
trol cf the board of trade, and this department has the custody of 
these funds. 1 

VI. The fisheries department. 

VII. The bankruptcy department. The companies (winding-up) 
act of 1890 applied to the winding-up of insolvent companies some 
of the leading principles of bankruptcy law, namely, that of the 
official custody of the assets at the initial stage of the proceedings, 
with liberty to the creditors and contributories of the company to 
later substitute their own liquidator. The act also applied to wind- 
ing-up of companies another principle, that of an official investiga- 
tion into the causes of failure and the conduct of those responsible for 
the trading and financial transactions causing the insolvency. The 
act also provided for a public examination of promoters, directors, 
and officers, and for reports similar in some respects to the reports 
upon the bankrupt's conduct and affairs under the bankruptcy acts. 

For the purpose of carrying this into effect official receivers are 
attached to the courts which have winding-up jurisdiction, and the 
board of trade is intrusted with power of control over the accounts 
and proceedings of liquidators of companies similar to that exercised 
over trustees in bankruptcy. 2 

i Companies (winding-up) act, 53 and 54 Vict., c. 63, 1890; companies act, 63 and 64 
Vict., c. 48, 1900. 

2 Companies (windine-up) act, 53 and 54 Vict., c. 63, 1890; companies act, 63 and 64 
Vict, c. 48, 1900 ; Chitty's Digest of the Laws of England ; Encyclopedia of Laws of 
England, 2d e<l., vol. II ; companies acts cited. 



LBFe 13 



